The "Sudden Demise" of a RMB 1 Billion Consumer Fund

"The materials have been presented at the meeting and sent back."

An investment manager working at an industrial fund under a state-owned enterprise is telling the story of a project he was in charge of that has been halted. This project is a consumer-oriented financial investment fund with a scale of 1 billion yuan.

One week before the release of the "Guiding Opinions of the General Office of the State Council on Strengthening Supervision, Preventing Risks, and Promoting the High-quality Development of Private Equity Investment Funds" (Document No. 54 [2026] of the General Office of the State Council, hereinafter referred to as the "Opinions") on June 5th, this project was regarded as an innovative model for the market-oriented exploration of the state-owned enterprise group.

Through interviews with relevant personnel from central and local state-owned enterprises, the Economic Observer learned that since the release of the "Opinions" on June 5th, the internal office systems of many central and local state-owned enterprises have adjusted the fund business process. The new private equity fund project approval and project acceptance work have generally entered a suspension state.

The above business adjustment stems from the simultaneous implementation of two sets of regulatory rules: one is the "Opinions" issued by the General Office of the State Council on June 5th (Document No. 54 [2026] of the General Office of the State Council), and the other is the "Administrative Measures for Private Equity Investment Funds of Central Enterprises" (hereinafter referred to as the "Measures") issued by the State-owned Assets Supervision and Administration Commission in May. A two-tier regulatory framework, one for overall supervision of the national private equity industry and the other for standardizing the investment control of central enterprise state-owned assets, has been officially implemented.

The Economic Observer found through sorting that from mid-May to mid-June 2026, provincial property rights trading platforms in more than one place have concentrated on listing and divesting a batch of state-owned fund-related assets.

A special rectification work for state-owned private equity funds, focusing on standardizing main business investments and cleaning up inefficient financial funds, has been carried out simultaneously in the central and local state-owned asset systems.

01

The Storm Has Arrived

The investment manager of the industrial fund under the above state-owned enterprise said that originally the fund's fundraising targets had been locked in two insurance institutions, the project reserve pool had completed three rounds of due diligence, and the partnership agreement had also entered the final legal review stage.

After the "Opinions" were implemented on June 5th, the risk control department of the state-owned enterprise group issued a notice: All new private equity fund project approvals are suspended, waiting for the reform plan for existing funds to be introduced.

The experience of this investment manager is not an isolated case.

The Economic Observer learned from several state-owned capital investment and operation companies that after the release of the "Opinions" on June 5th, according to the interviewees, some state-owned enterprises have issued internal notices or held meetings for discussions. The core requirement is the same: Suspend the approval of new private equity fund projects and start sorting out the ledger of existing funds.

The person in charge of the investment department of a state-owned capital operation company revealed that the "granularity" of this self-inspection far exceeds that of previous years. "In the past, we also conducted fund audits every year, but mainly focused on large-loss projects. This time, we are required to penetrate into each sub-fund and each underlying project, especially multi-layer nested structures and related-party transactions." The person said that his team has been working overtime for several days just to sort out the ledger.

Simultaneously with the internal rectification of state-owned enterprises, a number of capital operations that can be publicly verified are being carried out.

In the past month, the Economic Observer sorted out the announcements of property rights exchanges in many places and found that state-owned asset platforms in Shanghai, Liaoning and other places have intensively started to divest non-main business and inefficient fund assets.

According to the statistics of public announcements, from mid-May to mid-June 2026, the provincial property rights trading platforms in Shanghai and Liaoning concentrated on listing the shares of state-owned private equity funds, the equity of fund managers, and the equity participation assets of cross-industry financial funds. The transferors are all provincial/municipal state-owned asset platforms. Most of the transfer motivations disclosed in the announcements point to the matching of the new regulations on central enterprise funds of the State-owned Assets Supervision and Administration Commission and the private equity supervision requirements of the General Office of the State Council. The core is to divest non-main business, inefficient, and pure financial investment funds.

For example, in mid-May, Shanghai Industrial Investment (Group) Co., Ltd., a Shanghai state-owned asset investment platform with an asset scale of hundreds of billions according to public statistics, listed the 100% equity of Shanghai Liuliguang Pharmaceutical Development Co., Ltd., a cross-regional pharmaceutical investment and financing platform under its umbrella, for transfer through the Shanghai United Assets and Equity Exchange. This platform was established in 2021 and was mainly used for the financial investment in the mixed-ownership reform of Tianjin Pharmaceutical Group. The corresponding listing announcement shows that this transfer is to implement the latest state-owned fund regulatory requirements and optimize the layout of cross-regional financial investments.

Why carry out such rectification of state-owned private equity at this time? To answer this question, we need to go back to the "growing pains" accumulated during the rapid expansion of state-owned funds in the past few years.

02

Regulatory Blind Spots

The rectification work is in progress, but there is no unified approach within state-owned enterprises on how to carry out the rectification.

A person in charge of the risk control department of a state-owned enterprise interviewed by the Economic Observer described an internal debate: The group requires the classified disposal of existing funds, but different departments have different opinions on the definition criteria for "non-main business". The investment department believes that as long as the financial returns are considerable, cross-border investments in consumption and finance are not considered to be deviating from the real economy; the risk control department believes that all projects that are not in the group's main business industrial chain should be divested.

The focus of the debate is: Where is the boundary exactly? The person in charge of the risk control department of this state-owned enterprise said that finally, the senior management of the group decided to "implement strictly". Existing projects that cannot prove the existence of synergistic effects with the main business will be included in the exit list.

Qiu Yuandong, a partner of a law firm that has long served state-owned funds, explained the logic to the Economic Observer: When a central enterprise establishes an industrial fund, the State-owned Assets Supervision and Administration Commission manages whether the "investment behavior is compliant and whether there is any loss of state-owned assets", but it does not directly intervene in the daily investment decisions, post-investment management, and exit rhythm of the fund; the China Securities Regulatory Commission manages whether the "fund filing materials are complete and whether the information disclosure is compliant", but whether the fund's investment deviates from the central enterprise's main business and whether there is blind cross-border investment are not within the scope of the China Securities Regulatory Commission's responsibilities.

Qiu Yuandong said that according to his observation, previously the two sets of regulatory rules for state-owned asset investment supervision and private equity industry supervision were independent, and there were certain blind spots in the connection of rules in the aspect of fund main business synergy constraints.

Some seemingly "rational" grass-roots choices have gradually accumulated into problems.

Zhou Xingqiang, the person in charge of a local state-owned capital investment platform, told the Economic Observer about his "dilemma": Under the previous local industrial investment promotion assessment system, establishing industrial funds has become the mainstream operation path for local governments to implement investment promotion projects.

Zhou Xingqiang said, "We established seven or eight sub-funds in three years, and the investment fields ranged from cultural tourism to agriculture to supply chain. Each fund requires a team and a process, but the actual amount of money invested is less than half of the fundraising amount."

An investment manager of an energy central enterprise summarized this phenomenon as "establishing for the sake of establishment": "The group wants to tell a story, the local government wants a report card, and the GP wants management fees. The interests of the three parties are highly consistent in the matter of 'establishing a fund'. As for whether the investment is good or not and whether it is related to the main business, that is a later matter."

The interviewee from the Shanghai state-owned asset system believes that this time the State Council has issued a top-level document to coordinate and integrate the two sets of rules for state-owned asset investment control and private equity industry supervision, establishing a unified regulatory standard, a clear compliance red line, and a cross-departmental collaborative accountability mechanism. The next question to be answered is: Where will this new set of "three unifications" rules lead state-owned private equity?

03

Re-positioning

While the rectification of existing funds is in full swing, another task is also being carried out simultaneously, which is to redefine "where to invest".

An investment manager of an aerospace state-owned enterprise has been busy recently not with divesting projects, but with re-sorting out the investment list. He told the Economic Observer that the fund originally covered seven or eight tracks, from intelligent manufacturing to new materials to energy conservation and environmental protection. The coverage was wide but "not focused enough". After the new regulations of the General Office of the State Council and the detailed rules of the State-owned Assets Supervision and Administration Commission were implemented, the group required all funds to re-submit investment strategies. The core standard is only one: Whether it forms an industrial chain synergy with the group's main business.

"In the past, the core indicators for team assessment were IRR (Internal Rate of Return) and DPI (Distributed to Paid-in Capital). This year, the group has added a new internal hard assessment standard, requiring that the proportion of projects invested in the upstream and downstream of the group's main business industrial chain should not be less than 70%. This proportion is independently set by the enterprise according to its own industrial characteristics and is not a unified national regulatory hard red line." This investment manager said that the team spent three weeks streamlining the original more than 60 reserve projects to more than 30. Most of the eliminated projects had good financial performance but had no industrial linkage with the group's main business. At the same time, they supplemented "small and specialized" hard technology projects in the subdivided fields of the industrial chain such as fluid power and special valves.

The transformation of the fund he is in charge of is not an isolated case.

The investment person in charge of a state-owned capital mother fund in South China showed the Economic Observer their newly revised "Investment Negative List": It has expanded from the original 8 items to 22 items. The new items include "Do not invest in pure financial projects unrelated to the 20+8 industrial clusters", "Do not invest in the real estate field", "Do not participate in secondary market private placement financial investments with the sole purpose of earning short-term price differences", etc. Correspondingly, this mother fund has established three sub-funds this year, all of which are invested in semiconductor equipment and biological manufacturing.

"In the past, when we looked at projects, we first calculated the IRR; now we first look at 'whether it is needed locally'." The investment person in charge of this state-owned capital mother fund said that the change in the assessment orientation is forcing the team to reconstruct its capabilities. "In the past, the people we recruited were good at financial modeling. Now we need people who understand the industry and technology."

The local state-owned assets are also making adjustments. A GP participating in a central enterprise chain leader fund told the Economic Observer that in the new version of the investment agreement of this chain leader fund, two constraint indicators, "reinvestment ratio" and "main business synergy coefficient", have been added for the first time. Among them, the reinvestment ratio of not less than 60% in the industrial chain is a separate agreement clause for this fund and is not a unified regulatory requirement; at the same time, it is stipulated that each external investment needs to pass a special synergy effect assessment by the group's industrial department before it can be implemented.

The transformation is not without cost.

The investment manager of the industrial fund under the above state-owned enterprise said, "We are familiar with consumer projects, and the due diligence models are all ready. Hard technology projects are different. We can't understand the technical routes and can't predict the industrialization cycle. We have to start learning from scratch." The team has invited technical experts from the group's research institute for internal training for three consecutive weeks. "In the past, we looked at financial statements. Now we look at patents."

The greater pressure comes from the fundraising side.

The investment person in charge of the above state-owned capital mother fund revealed that in the past few years when raising funds, market-oriented LPs (such as insurance funds and bank wealth management products) only cared about financial returns and were not sensitive to "investing in the industrial chain" and "reinvestment ratio". Now that the fund's investment direction is restricted to the main business industrial chain, some LPs have expressed concerns about the rate of return. "We are re-negotiating the terms with the LPs. Some are willing to accept a slightly lower return expectation in exchange for a more stable underlying asset; some have directly said that they will reduce their capital."

The situation of local state-owned asset platforms is more delicate. Zhou Xingqiang, the person in charge of the above local state-owned capital investment platform, said frankly, "At that time, in order to raise funds, we made high return commitments to the LPs. Now the policy requires us to shrink our front line and return to the main business. When we talk to the LPs about early exit, they don't agree and say that we are in breach of contract." He expects that there will be a wave of negotiation and game with the LPs in the second half of the year.

Qiu Yuandong believes that the long-term impact of this round of new policies is not to weaken state-owned private equity, but to reposition it: from quasi-market-oriented funds that prioritize scale and financial returns to strategic capital that prioritizes industry and patience.

Qiu Yuandong summarized three levels of expected changes: In the short term, inefficient, shell, and pure financial arbitrage state-owned private equity funds will be accelerated out of the market; in the medium term, homogeneous funds will be merged and integrated, and the industry concentration will increase; in the long term, state-owned private equity funds will gradually reduce pure financial investments that are homogeneous with private market-oriented capital, avoid fully competitive non-main business tracks, focus on long-term hard technology fields where private capital is less willing to invest, return to the "complementary" role, invest in long-term and high-risk hard technology that private capital is reluctant to invest in, and make up for the key shortboards in the industrial chain.

"This is not a contraction, but a return to the right position." Qiu Yuandong said.

This article is from the WeChat official account "Economic Observer", author: Wang Yajie. Republished with permission from 36Kr.