{"id":10694,"date":"2022-07-28T11:30:19","date_gmt":"2022-07-28T11:30:19","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=10694"},"modified":"2025-04-23T09:38:15","modified_gmt":"2025-04-23T09:38:15","slug":"government-guidance-funds-venture-capital-with-chinese-characteristics","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/government-guidance-funds-venture-capital-with-chinese-characteristics\/","title":{"rendered":"Government Guidance Funds: Venture Capital with Chinese Characteristics"},"content":{"rendered":"

The state is upping the ante in China\u2019s venture capital and private equity markets \u2013 with mixed results. Will entrepreneurs soon find their prospects hinge on whether the focus of their innovation aligns with the Chinese government\u2019s ideal for a technologically advanced state? Joe Cash investigates<\/span><\/h2>\n

Spread across roadsides the length and breadth of the country, red banners with the ubiquitous phrase \u2018Party Spirit\u2019 extol the virtues of the Chinese Communist Party (CCP). The term has become a catch-all to describe behaviours the Party considers correct and worth promoting. Most of them are fairly prosaic, for example praising filial piety. But with the economy straining under the weight of zero Covid<\/a> and global inflation, the Party is starting to liven things up. It\u2019s time to break the mould and harness the \u2018animal spirits\u2019 of venture capitalism.\u00a0<\/span><\/span><\/p>\n

Chinese policymakers need to give the country\u2019s private capital markets a bit of a kick because confidence is waning. In Q1 of this year, early-stage investment by venture capitalists declined by 90% year on year. Then there is the issue of ensuring that investment gets directed to where the Party wants money to be spent, preventing the \u201cdisorderly expansion of capital,\u201d otherwise known as the platform economy growing out of control. Trillions of RMB of government funding is now pumping through China\u2019s private capital markets, with mixed results for the country\u2019s entrepreneurs.\u00a0<\/span><\/span><\/p>\n

\"launchpad<\/a><\/p>\n

Background\u00a0<\/span><\/span><\/h4>\n

There is a new sheriff in town, and China\u2019s private sector has had a rather rude awakening to this fact over the past two and a half years. The State Administration for Market Regulation\u2019s (SAMR) decision to slap a record-breaking \u00a32 billion fine on Alibaba<\/a> in April 2021, in response to founder Jack Ma\u2019s infamous speech in October 2020 criticising the government\u2019s handling of China\u2019s financial development, was the turning point. From then on, no entrepreneur, service, or technology could be perceived as equal to or above the government or its regulators. It has brought substantial change: consumer-internet technologies are out, replaced by artificial intelligence, biotechnologies, and advanced manufacturing<\/a>.\u00a0<\/span><\/span><\/p>\n

In short, the Chinese government is reshaping one of the world\u2019s biggest start-up scenes \u2014 and perhaps not necessarily for the better.<\/span><\/p>\n