China launches new funds to boost technological prowess
What's the story
China has launched a national venture capital fund and three regional funds to support domestic technology firms. The move comes as part of Beijing's efforts to promote innovation and bolster emerging industries. The National Start-up Investment Guidance Fund, along with the three regional funds for the Beijing-Tianjin-Hebei region, Yangtze River Delta and Greater Bay Area, started operations on Friday.
Fund details
National fund's financial backing and regional expansion
The national fund is backed by CNY 100 billion from the Ministry of Finance, through ultra-long special sovereign bonds. The three regional funds have been established through equity stakes held by the national fund in limited partnerships. Each of these funds is expected to grow beyond CNY 50 billion, according to Huo Fupeng, chairman of the state fund.
Strategic shift
China's tech race and fiscal discipline
China is doubling down on technological breakthroughs amid intensifying competition with the US in sectors like semiconductors. However, tighter fiscal conditions such as rising debt risks and slower revenue growth have forced the government to be more disciplined about its investments. The emergence of AI start-up DeepSeek this year has also highlighted how private capital can drive innovation.
Fund objectives
Guidance fund's mission and investment strategy
Bai Jingyu, an official at the National Development and Reform Commission (NDRC), said "emerging and future industries are still struggling with limited investment." He added that "addressing these gaps through the development of patient capital is the very purpose and mission of the guidance fund." The state fund will follow market-based principles, with professional managers making investment decisions.
Fund strategy
National fund's long-term vision and investment focus
The NDRC first announced plans for the national fund in March, estimating it could drive CNY 1 trillion of investment from local funds and private capital. The national fund will run for 20 years, 10 years devoted to investment and another 10 to exits. It will support long-term growth of companies, cultivate "little giants" (smaller firms aligned with government's tech priorities) as well as unicorns across industries.
Sectoral focus
Investment distribution and sector focus of the national fund
Seed and start-up firms will account for at least 70% of the national fund's investments. The fund will target smaller companies with valuations of no more than CNY 500 million, and each deal will be capped at CNY 50 million. Strategic emerging and future industries will be prioritized, with plans to invest in integrated circuits, quantum technology, biomedicine, brain-computer interfaces and aerospace sectors.