Regulators instruct SOEs to ramp up VC funding
Beijing wants its state-owned enterprises (SOEs) to jumpstart China’s flagging venture capital (VC) industry.
On Tuesday, Xinhua reported that the SOE regulator (SASAC) and macro planner (NDRC) issued measures encouraging central SOEs to expand their VC investments.
- Details of the measures are not yet publicly available.
Some context: In recent years, several leading central SOEs have emerged as prominent VC investors, successfully incubating startup unicorns in China’s emerging aviation, green hydrogen, and battery-swapping industries.
More context: In April, SASAC relaxed short-term financial KPIs for SOEs, providing greater flexibility to invest in long-term ventures or absorb the impact of unsuccessful projects – priming SOEs to take on a bigger role in VC investment.
Per Xinhua, the recent measures encourage SOEs to establish:
- VC funds targeting small and early-stage startups, with a focus on investing in cutting-edge technologies over long-term horizons
- Proof-of-concept, seed, and angel funds to support the transformation of promising R&D results into viable business ventures
Get smart: Central SOEs could play a key role in providing the patient capital needed to foster a successful startup ecosystem.
- Unlike cash-strapped local governments that currently dominate China's VC funding landscape, industrial SOEs have the advantage of deeper industry expertise and a clearer understanding of sector-specific needs and priorities.
- Leading SOEs in energy and manufacturing can accelerate the commercialization of promising technologies by generating demand for cutting-edge solutions in cleantech, robotics, and AI as these products reach maturity.