Shanghai unveils 32 initiatives to boost equity investment growth

Shanghai

The Shanghai municipal government has recently unveiled a series of 32 initiatives to enhance the growth and advancement of the city's equity investment sector, a new China Daily report revealed. The measures are intended to encourage increased early-stage investments in small technology firms, foster the development of long-term capital, and improve the avenues for exiting equity investments.

According to the new policies, there will be attempts to establish a science and technology guidance fund at the municipal level, to systematically expand venture capital and angel investment.

The municipal government aims to encourage the growth of long-term capital by facilitating collaborations between insurance companies and prominent equity investment institutions in Shanghai. This will enable the insurance companies to enhance their investments in crucial industries and advanced technologies. As per the recently introduced measures, eligible asset management firms affiliated with commercial banks can establish subsidiaries in Shanghai to invest in unlisted businesses and equity investment funds in Lingang Special Area or the wider Yangtze River Delta region.

Zhou Xiaoquan, Director of the Shanghai Municipal Financial Regulatory Bureau, stated that the new measures aim to channel additional capital towards early investments in technology companies of smaller sizes. According to him, this will aid in establishing an investment atmosphere where the government takes the lead, encouraging more institutions to focus on long-term investments.

While promoting the development of secondary market funds, pilot programs under which stocks can be distributed for equity investment should also be conducted to expand the exit channels.

Favourable tax policies have also been introduced. Venture capital enterprises and angel investors that have directly invested in seed-stage and start-up technology-based enterprises in the form of equity investment for two years can deduct 70 percent of the investment amount from the taxable income.

By referring to the registration-based initial public offering mechanism and the filing mechanism for Chinese companies' overseas listing, Shanghai-based equity investment fund managers are encouraged to list in overseas markets in the form of IPOs, mergers and acquisitions or restructuring, according to the new measures.

According to the statistics of the Asset Management Association of China, there were 1,843 private equity and venture capital managers registered in Shanghai as of the third quarter of 2023. They managed 8,865 fund products with the assets under management (AUM) reaching 2.3 trillion yuan ($320 billion). Among them, the venture capital of the AUM of Shanghai reached 615 billion yuan, ranking first in China.