(Yicai Global) Sept. 23 -- Investment funds led by state-owned enterprises have been established at central and local levels. They aim to encourage entrepreneurship and innovation, promote industrial advancements, investment, and preserve and increase the value of state-owned assets, an industry insider told Yicai Global.
These investment funds are exploring new ways to use state-owned company assets, to offset the lack of private investment. If more of such funds are set up by more local governments, a large amount of capital will be made available nationwide, Mr. Li Jin, chief of the China Enterprise Research Institute, said in an interview with Yicai.
The funds often go to emerging industries, which have significance for innovation and improving industrial technology. If the fund is mainly concentrated in small and medium-sized tech startups, then government and state-owned assets can play a role in providing policy guidance and backing through investment, Mr. Li said.
At the same time, some problems faced by small and medium-sized technological enterprises, such as the high cost and difficulty of obtaining financing, can also be addressed.
Given the profitability and rate of return, state-owned funds may not be used to invest in zombie enterprises' asset disposal or overcapacity reduction, Mr. Li added.
Instead, he believes that state-owned funds should preserve and increase their value, with profitability as a basic goal. Departments supervising state-owned assets hold tight control over their investments. So, the ability of the fund to avoid risk is of great importance.
Recently, Guangzhou's municipal government took the lead in establishing an Innovation Investment Fund, as the main fund is known, and encouraged private investors to set up sub-funds. In the first phase, its funding will exceed CNY20 billion.
In addition, venture capital funds guided by the State-owned Assets Supervision and Administration Commission and sponsored and set up by the China Reform Holdings Corporation Ltd, had a total value of CNY200 billion in August. The first phase of funding raised CNY100 billion.