The government investment funds are about 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 "Working Measures for Strengthening the Layout Planning and Investment Guidance of Government Investment Funds" (hereinafter referred to as the "Working Measures"); the National Development and Reform Commission simultaneously introduced the "Administrative Measures for the Investment Evaluation of Government Investment Funds" (hereinafter referred to as the "Administrative Measures").

Among them, the "Working Measures" define the nature of government investment funds and clarify the investment directions and behaviors of the funds; the "Administrative Measures" further refine them into 13 evaluation indicators, and the following are all bonus items -

There are no requirements for the fund to reinvest or attach the condition of relocating the registered address in the relevant agreements;

The proportion of early - stage and small - scale investments ≥ 70%; the average investment period ≥ 5 years; the proportion of social capital contribution ≥ 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 that the state has systematically regulated the layout and investment directions of government investment funds.

A Major Move in Government Investment Funds

Let's first look at the "Working Measures for Strengthening the Layout Planning and Investment 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 guidance.

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

It is worth mentioning that the "Working 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 following, herd behavior, and low - level redundant construction.

In specific investment actions, the "Working 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 should not engage in:

(1) Disguisedly increase local government implicit debts through methods such as equity - in - name - but - debt - in - fact;

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

(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 cooperation with local funds. In the fields of frontier technology 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 directions 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 directions 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 index system that highlights the policy orientation evaluation of fund investment, 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 Investment Evaluation of Government Investment Funds" is an extension of the "Working Measures" in terms of assessment.

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

Among them, in the aspect of "supporting the development of new - quality productivity", 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. This mainly includes: high - quality development of key industrial chains in the manufacturing industry, reconstruction of industrial foundations and research on major technological 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. This 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 reinvestment, relocation, and investment promotion are defined, including: whether there are restrictions on reinvestment in the region; whether there are conditions for relocating 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 reinvestment is the most detailed -

If the relevant agreements do not require the fund to reinvest, 3 points will be awarded;

If the fund reinvestment ratio exceeds 1.5 times, 0 points will be awarded;

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

In response to the possible crowding - out effect on private capital mentioned earlier, the "Administrative Measures" put forward supporting the development of the private economy and promoting private investment in Article 5, and examine the situation of the fund guiding and leveraging social capital contributions in Article 7. Among them, funds with a social capital contribution ratio of 50% or more in the paid - in scale will get more points.

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

In addition, the "Administrative Measures" also assess the capital contribution completion status, idle funds, internal rate of return, and asset appreciation rate of the funds, but the proportion of scores for each item is small, only 1 point each.

This time, the investment evaluation of government investment funds implements a "penetrating" evaluation, that is, the evaluation scores of the mother 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

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

So far, the government - guided funds that have been around for more than a decade have opened a new chapter.

Now, 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 holding 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.

Along with this, challenges also lie ahead. In the past few years, there have been many disputes over the reinvestment and fault - tolerance of government investment funds, and problems such as homogeneous competition and low - level redundant construction in the blowout development of local guiding funds have also emerged.

Now, the National Development and Reform Commission has mentioned that the introduction of the "Working 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 official account "Investment World" (ID: pedaily2012), author: Yang Wenjing, published by 36Kr with authorization.