The municipal government of Guangzhou, capital of Guangdong province, has invested CNY200 billion to establish funds that will help promote activities involving semiconductors, renewable energy and other hi-tech fields in the city. This program follows various technology initiatives recently launched by the municipal governments of Beijing, Shenzhen and Hangzhou to help boost China’s economic recovery, as the country emerges from three years of strict pandemic controls.
Local authorities in Guangzhou announced the injection of CNY150 billion into an Industry Investment Fund of Funds (FoF), which will invest via sub-funds and direct financing to attract medium- to large-size projects to Guangzhou and gradually expand into a cluster of funds totaling CNY600 billion. An FoF, which is designed to allocate cash to a portfolio of investment funds, is increasingly being used by Chinese local governments to develop preferred industries. Another CNY50 billion was set aside by Guangzhou for its Innovation Investment FoF, which will target early-stage hi-tech companies. This fund, which is expected to grow into a cluster worth CNY200 billion in the next few years, will provide specific support in terms of talent and technology transfer, as well as angel and seed investments to start-ups.
Guangzhou’s latest initiative is in line with calls made by China’s leadership for help to revitalize the country’s beleaguered private sector during the 20th Party Congress last October. The city’s funding effort would appear to raise the stakes for China in its tech rivalry with the U.S. Competition in the semiconductor sector intensified after U.S. President Joe Biden signed the Chips and Science Act last August, allocating nearly USD53 billion in incentives to lure more chip manufacturing to the U.S.
Forming government-led funds is not new in China, where state-level financial support has helped develop major industries over the past decades. The China Integrated Circuit Industry Investment Fund, also known as the Big Fund, was set up in 2014 as the primary financing vehicle for the country’s semiconductor industry, with the initial round of investments reaching more than CNY138 billion. This fund, however, was engulfed in a corruption scandal last year, with a number of its executives put under investigation.
The government of Anhui province last month announced that it will set up a guidance fund of CNY200 billion, targeting tech industries. In the same month, the municipal government of Xian, capital of Shaanxi province, unveiled a plan to form a group of funds worth more than CNY100 billion to focus on investments in advanced manufacturing, the South China Morning Post reports.
