China to Set Up A $6.5B VC Fund To Support Tech Startups
China’s government is set to launch a venture capital fund worth 40 billion Yuan (about $6.5 billion) to support seed-stage tech startups in emerging industries. The fund will include capital from the government as well as private investors in their latest move to promote innovation in the country.
“The establishment of the state venture capital investment guidance fund, with the focus to support fledging start-ups in emerging industries, is a significant step for the combination of technology and the market, innovations and manufacturing,” China’s State Council, the cabinet, said in a statement published on Wednesday in the government’s website.
“It will also help breed and foster sunrise industries for the future and promote (China’s) economy to evolve towards the medium and high ends.”
The sectors to which the government is referring to include the emerging tech and green energy. Le Keqiang, premier of China’s state council, said that the fund is aimed at supporting the development of these industries, which the government hopes will eventually boost economic growth.
The government did not give a timeline regarding the establishment of the fund, but given the nature of such a fund, it won’t take more than a few weeks from now.
Talking about China’s venture capital market, it remains small thanks to the country’s decades of the economic strategy which imposes a variety of restrictions on private sector’s development.
In the first half of 2014, there were 83 new venture capital funds set up in China, according to Reuters, citing market research by a Chinese service provider Zero21PO Capital. The research estimates the local VC funds at a moderate $6.76 billion of worth.
However, the Chinese government is now showing its growing commitment to supporting the expansion of the industry. In November last year, China’s Shanghai-Nanxiang government and IDG Capital Partners announced a partnership with Pozible, Melbourne-based online crowdfunding platform, to flourish the emerging Internet of Things (IoT) sector by backing IoT startups and entrepreneurs with investor capital.
Moreover, regulators issued new rules last month that allow insurance companies to invest their huge financials in venture capital funds for the first time.
The launch of the new government-sponsored VC fund is part of China’s efforts at financial reform, noted the Financial Times. The aim is to boost investments in private sectors to uplift the emerging technologies and reduce the country’s economy’s reliance on fixed asset investments in infrastructure and property.