China Unveils Measures to Boost VC Investment in Tech Sector

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Fang Xinghai, vice chairman of the China Securities Regulatory Commission, at the Lujiazui Forum in Shanghai on June 19. Photo: VCG

China’s State Council has published guidelines to boost investment by the country’s venture capital (VC) industry in technology companies at various stages of development, aiming to invigorate a sector that’s been in the doldrums and provide more financing to drive innovation.

The guidelines, released on Wednesday, call for improvements in the policy environment and management system for the entire VC chain from fundraising and investment to management and exit channels.

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China’s new guidelines aim to boost VC investment in technology companies by improving policies across the VC chain and enhancing foreign investor access.
VC/PE fundraising in China has experienced a downturn, with a significant drop in new fund creation and a decrease in quarterly fundraising figures.
The guidelines encourage diverse VC products, support from banks and insurance companies, and facilitate better exit strategies amid fewer IPOs.

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Who’s Who

Beijing Redbud Capital Management Co. Ltd.: Beijing Redbud Capital Management Co. Ltd. is an investment firm whose director of legal affairs, Wang Shu, noted that insurance funds have been hesitant to invest in VC funds due to constraints imposed by the C-ROSS risk management framework. However, she expressed that new guidelines are expected to remove these obstacles, facilitating more cooperation between insurance companies and VC funds.

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What Happened When

2023：: The amount of money raised by Chinese VC and private equity (PE) firms slumped 18.9% to $110.4 billion, the second straight annual decline.

2023：: Out of the 12,893 VC and PE firms in the market, only 3,847 set up new funds, and among them, 56% managed to start only one fund.

First three months of 2024：: 1,395 new funds were set up in China’s VC/PE market, representing a 38% drop from the previous quarter and a 34% year-on-year decline.

Tuesday, June 18, 2024：: Fang Xinghai, a vice chairman of the China Securities Regulatory Commission, downplayed the slump in a speech at the Lujiazui Forum, noting that the country’s VC/PE funds invested some 192 billion yuan ($26.4 billion) in around 4,400 projects in the first quarter.

Wednesday, June 19, 2024：: China’s State Council published guidelines to boost investment by the country’s venture capital industry in technology companies at various stages of development.

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