The government investment funds are going to change.

Yesterday (January 12th), the National Development and Reform Commission, together with the Ministry of Finance, the Ministry of Science and Technology, and the Ministry of Industry and Information Technology, jointly issued the "Work Measures for Strengthening the Layout Planning and Investment Direction Guidance of Government Investment Funds" (hereinafter referred to as the "Work Measures"); the National Development and Reform Commission also simultaneously issued the "Administrative Measures for the Evaluation of the Investment Direction of Government Investment Funds" (hereinafter referred to as the "Administrative Measures").

Among them, the "Work Measures" define the nature of government investment funds and clarify the investment direction and investment behavior of the funds; the "Administrative Measures" are further refined into 13 evaluation indicators, and the following are all bonus items -

The relevant agreements do not require the fund to make return investments or attach conditions for the relocation of the registered address;

The proportion of early - stage and small - scale investments ≥ 70%; the average investment period ≥ 5 years; the proportion of social capital contributions ≥ 50%;

Investment in fields such as the metaverse, brain - computer interfaces, quantum information, humanoid robots, generative artificial intelligence, biological manufacturing, biological breeding, future displays, future networks, and new energy storage...

This is the first time at the national level to systematically standardize the layout and investment direction of government investment funds.

A Major Move in Government Investment Funds

Let's first look at the "Work Measures for Strengthening the Layout Planning and Investment Direction Guidance of Government Investment Funds". With 14 regulations, it clarifies the issues of "where to invest, how to invest, and who will manage" government investment funds, and makes relevant regulations in optimizing the fund layout and strengthening investment direction guidance.

Further, the "Work Measures" first clearly define government investment funds and point out that government investment funds should play a guiding role, highlight the policy - oriented positioning, and effectively support major strategies, key areas, and weak links where the market cannot fully play its role.

It is worth mentioning that the "Work Measures" clearly put forward two "preventives" -

Prevent homogeneous competition and the crowding - out effect on social capital, and promote the formation of a high - quality development pattern of government investment funds with appropriate scale, reasonable layout, standardized operation, scientific efficiency, and controllable risks.

For industries encouraged by policies to invest in, strengthen evaluation and demonstration, prevent blind follow - the - crowd behavior, rush - to - the - front actions, and low - level redundant construction.

In specific investment actions, the "Work Measures" require government investment funds to clarify the key industrial fields for investment in the fund establishment plan, and further put forward several "key investment fields" and "prohibited investment behaviors" that meet the requirements, including not investing in restricted or eliminated industries stipulated in relevant policies.

At the same time, it clearly lists several investment behaviors that government investment funds must not engage in:

(1) Disguisedly increase local government implicit debts through methods such as equity - like debt;

(2) Engage in other publicly traded stock investments, except for mergers and acquisitions, private placements, and strategic placements that the establishment plan clearly allows participation in;

(3) Directly or indirectly engage in derivative transactions such as futures;

(4) Provide guarantees for enterprises or projects;

(5) Conduct investments with unlimited liability.

In addition, national - level funds are encouraged to strengthen linkage with local funds. In the fields of cutting - edge technologies and key links of the industrial chain and supply chain, combined with local resource endowments, form a synergy of funds through methods such as jointly establishing sub - funds or contributing to local funds.

Regarding the investment direction of local funds, local funds are required to find their own positioning. Under the management of provincial - level governments, comprehensively consider the local financial resources, industrial resource foundation, debt risks, etc., and choose investment fields according to local conditions. In addition, the provincial - level development and reform departments will take the lead in formulating a list of key investment fields in the region and optimize the fund layout and investment direction accordingly.

Finally, the assessment criteria for government investment funds are finalized - the National Development and Reform Commission, together with relevant departments, will establish an evaluation indicator system that highlights the policy orientation evaluation of the fund's investment direction, covers the entire process of fund operation and management, and combines quantitative and qualitative evaluations.

The Most Detailed Assessment Released

The "Administrative Measures for the Evaluation of the Investment Direction of Government Investment Funds" is an extension of the "Work Measures" in terms of assessment.

The document sets up a specific evaluation indicator system for government investment funds, scoring from three first - level indicators (including 13 second - level indicators) such as policy compliance indicators, indicators for optimizing the productivity layout, and policy implementation ability indicators, with a total score of 100 points.

Among them, in the aspect of "supporting the development of new - quality productive forces", detailed investment directions are stipulated:

(1) Cultivate emerging industries and future industries. Emerging industries mainly include fields such as new - generation information technology, new energy, new materials, high - end equipment, new - energy vehicles, green environmental protection, civil aviation, and ship and marine engineering equipment; future industries mainly include the metaverse, brain - computer interfaces, quantum information, humanoid robots, generative artificial intelligence, biological manufacturing, biological breeding, future displays, future networks, and new energy storage.

(2) Promote the transformation and upgrading of traditional industries. It mainly includes: high - quality development of key industrial chains in the manufacturing industry, reconstruction of industrial foundations and research on major technical equipment, major technological transformation and upgrading of the manufacturing industry, and support for enterprises to "go global".

(3) Support the development of the digital economy. It mainly includes: the "artificial intelligence +" initiative, wide application of large models, new - generation intelligent terminals such as artificial intelligence mobile phones and computers and intelligent robots, as well as intelligent manufacturing equipment, large - scale application of 5G, development of new cultural formats, and development of the data industry.

In the part of "promoting the construction of a unified national market", the previous practices of guiding funds in terms of return investment, relocation, and investment promotion are defined, including: whether there is a situation of restricting return investment in the local area; whether there are conditions attached for the relocation of the registered address when investing in enterprises; whether there are situations that hinder the construction of a unified national market.

Among them, the scoring for return investment is the most detailed -

If the relevant agreement does not require the fund to make return investments, 3 points will be awarded;

If the return investment ratio of the fund exceeds 1.5 times, 0 points will be awarded;

If the return investment ratio of the fund does not exceed 1.5 times, the score = 3×(1 - the return investment ratio of the fund/1.5).

In response to the possible crowding - out effect on private capital mentioned earlier, the "Administrative Measures" put forward in Article 5 to support the development of the private economy and promote private investment. Article 7 examines the situation of the fund guiding and leveraging social capital contributions. Among them, funds with the proportion of social capital contributions in the paid - in scale greater than or equal to 50% will get more points.

In the aspect of "early - stage, small - scale, and long - term investment" related to patient capital, the assessment tends to favor enterprises or projects in the Series A financing or earlier (i.e., "early - stage and small - scale investment"), as well as projects with a longer average investment period. Projects with "the proportion of early - stage and small - scale investment ≥ 70% or the average investment period ≥ 5 years" will get the most points.

In addition, the "Administrative Measures" also assess the capital contribution completion situation, idle funds situation, internal rate of return of the fund, and asset appreciation rate of the fund, but the proportion of scores for each item is not large, only 1 point each.

This evaluation of the investment direction of government investment funds implements a "penetrating" evaluation, that is, the evaluation scores of the parent fund are linked to those of direct investment funds and sub - funds. It is worth mentioning that a "negative behavior list for investment fields" is also established this time; and according to the scores, incentive or restraint mechanisms will be implemented in terms of cooperation with national - level funds, management fees, and income distribution.

Conclusion

Recalling January 7, 2025, the General Office of the State Council issued Document No. 1, the "Guiding Opinions on Promoting the High - Quality Development of Government Investment Funds", which for the first time put forward clear requirements for the classified and hierarchical management of funds and proposed a series of far - reaching measures such as encouraging the reduction or cancellation of return investment ratios.

So far, government - guided funds that have been around for more than a decade have turned a new page.

Nowadays, government funds have become the main force in China's venture capital. Data from the Zero2IPO Research Center shows that by 2025, the proportion of state - owned limited partners (LP) has further increased to 55%, the proportion of state - owned controlling has increased from 27% 15 years ago to 81%, and the proportion of state - owned participating funds has reached 8%. The importance of state - owned capital is self - evident.

Consequently, challenges are also ahead. In the past few years, there have been many disputes over return investment and fault - tolerance of government investment funds. Problems such as homogeneous competition and low - level redundant construction in the blowout development of local guiding funds have also emerged one after another.

Now, the National Development and Reform Commission mentioned that the introduction of the "Work Measures" and the "Administrative Measures" marks that China's government investment funds have entered a new stage characterized by "standardized development and quality and efficiency improvement".

The road ahead is long and arduous, and China's venture capital is moving forward.

This article is from the WeChat public account "Investment Community" (ID: pedaily2012), author: Yang Wenjing, published by 36Kr with authorization.