2024-08-15
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At the end of June, ChinaVenture.com, with the title "Who is the King of Investment Rolls: 3,138 Science and Technology Innovation Enterprises Moved to Jiangsu", counted the migration of 563,000 "national science and technology-based SMEs". This time, we will target state-owned investment platforms across the country and want to deeply analyze the investment situation and investment logic of state-owned platforms in the five years from 2019 to 2023.
Therefore, the China Venture Capital Research Institute released the "2019-2023 State-owned Assets Platform Analysis Report". The report shows that there are currently 23,014 state-owned assets in the country. Among them, there are 5,981 state-owned GPs and 16,205 state-owned LPs.
Judging from the investment results, the direct investment amount of state-owned enterprises in the past five years has reached 1.59 trillion yuan, directly investing in about 12,900 enterprises. If indirect investment is included, state-owned enterprises have invested in about 20,000 enterprises (deduplication has been removed). Moreover, the data shows that more than 98% of the 20,000 invested enterprises are still in existence.
For enterprises, the heavy investment from state-owned capital platforms has enabled start-ups to reduce their excessive reliance on bank debt financing, which undoubtedly reflects the country's strategic goal of financial support for the development of the real economy.
For the industry, the state-owned capital platform has promoted the development of semiconductors, artificial intelligence, biomedicine, advanced manufacturing and other industries, especially the continuous investment in bottleneck areas, which has provided development momentum for related companies. It can be said that the investment of state-owned capital is one of the important driving forces for industrial upgrading.
For the regional economy, the linkage between local state-owned capital platforms and industrial investment promotion plays a key role in the development of regional economy and industrial agglomeration. From a time perspective, the number of enterprises that have moved across cities has increased year by year, which reflects that the investment promotion effect of state-owned capital is becoming increasingly significant.
Of course, we also have some concerns. At present, state-owned assets have directly invested in 12,900 enterprises, which means that a large number of invested projects are waiting to be exited. State-owned investment platforms need to deeply realize that IPO is only a low-probability event, and exploring diversified exit paths will be closely related to the investment benefits and sustainable investment capabilities of state-owned institutions.
In addition, with the further development of local industrial funds, the total scale of state-owned institutions will continue to expand, and the situation of "too many people and too little porridge" in the primary market will further raise asset prices. "How to invest?" in the future is undoubtedly a major test for state-owned institutions.
Of course, in addition to the above intuitive investment data, we have some other findings, such as:
Among the companies that received investment in the past five years, one out of every three received direct investment from state-owned institutions.
From a provincial perspective, Guangdong state-owned assets take the lead in total direct investment; Jiangsu state-owned assets rank first in indirect investment.
The top three areas of investment by state-owned institutions are: electronic information, medical health and advanced manufacturing, among which electronic information investment accounts for more than 30%.
Big white horses and institutions with industrial backgrounds are most favored by state-owned assets. Among the top 10 institutions supported by state-owned assets, Shengshi Investment, CDH Investments and Yida Capital ranked the top three.
Between 2019 and 2023, state-owned institutions across the country directly invested 6366.347 billion yuan. Among them, mergers and acquisitions accounted for more than half, with an amount of 3351.990 billion yuan; new stock issuances accounted for 1566.248 billion yuan. Today we are discussing the corporate financing part other than mergers and acquisitions and new stock issuances. Data shows that the number of state-owned direct investment enterprises is 12,852, and the direct investment amount is 1586.849 billion yuan.
What is the concept?
During the same period, 38,279 enterprises nationwide received equity investment (excluding mergers and acquisitions and new share issuances), with a total financing amount of 6269.743 billion yuan. This means that one out of every three enterprises was directly invested by state-owned institutions; for every 100 yuan of financing, 25 yuan came directly from state-owned assets.
If that’s not enough, let’s make two more comparisons:GDPThe total amount is 1,576.034 billion yuan, which is equivalent to the annual GDP of Qingdao invested by national state-owned institutions in the past five years.
In comparison with foreign countries, the total amount of financing in the European primary market from 2019 to 2023 was approximately RMB 3,491.162 billion (estimated based on the exchange rate of that year), which is equivalent to the direct investment amount of state-owned institutions in the same period being approximately half of that in Europe (45.45%).
Before this, we knew that state-owned LPs already played an important role in the primary market. But when I first saw the scale of direct investment by state-owned institutions, I was still surprised. It was much larger than I had known before.
Let’s take a look at the details of the changes in state-owned direct investment in the past five years:
In 2019, the total amount of direct state-owned investment was 273.958 billion yuan. Since then, the data has increased year by year, with a brief decline in 2022, and jumped to 432.207 billion yuan in 2023, the highest in five years. The number of companies directly invested has also increased. In 2019, 2,152 companies received investment, and by 2022, 3,834 companies received investment, the highest in five years.
It is worth noting that there are 158 more companies invested in 2022 than in 2023, but the investment amount is 144.045 billion yuan less. This shows that the investment amount obtained by a single company in 2023 is decreasing.
There may be two reasons for this: first, influenced by the trend of "investing early, investing in small companies, and investing in technology", the proportion of early-stage companies directly invested by state-owned institutions is increasing; second, influenced by risk preferences, state-owned assets choose to diversify their investments and reduce the investment amount in each company to reduce risks.
Of course, looking at the overall situation over the past five years, mid- and late-stage companies still account for the majority. 68% of the investment events are mid- and late-stage companies, while early-stage (including seed and start-up) investment events only account for 32%.
The above is the situation of direct investment. Let’s talk about indirect investment.
From 2019 to 2023, state-owned institutions indirectly invested in 14,003 enterprises. It is worth noting that due to the lack of data, it is difficult for us to calculate how much money state-owned institutions have invested indirectly. We can only calculate the amount of indirect investment events, that is, the cumulative amount of indirect investment events is 1,073.178 billion yuan. The amount of these investment events is not all state-owned investment, and state-owned assets only participate as LPs.
Data shows that indirect investment by state-owned assets increased year by year from 2019 to 2021, and decreased year by year from 2021 to 2023. The number of events, the amount of investment events, and the number of enterprises all reached their peak in 2021. They were 5,023 investment events, the amount of investment events was 270.931 billion yuan, and the number of investment enterprises was 4,486. It can be seen that 2021 is a critical node.
In 2021, the national venture capital market ushered in a small climax. The reason is that benefiting from the stability of the domestic environment, the number of newly established funds in the VC/PE market in 2021 increased by 70.53% year-on-year, totaling 9,350. In the field of state-owned assets, the number of government-guided funds established and their own scale also increased significantly compared with 2020, with an increase of 77% and 207% respectively. However, in 2022, affected by the macro environment, the venture capital market as a whole declined.
There is another reason why indirect investment increased first and then decreased. From 2019 to 2021, many newly established state-owned capital platforms were still in the learning stage, mainly investing in GPs as LPs to try equity investment. However, after 2021, many state-owned assets began to invest on their own, which led to a decrease in indirect investment in the following two years.
If we focus on the provincial level, we will find that the state-owned assets in these six provinces are the most active: Guangdong, Jiangsu, Shanghai, Zhejiang, Beijing and Anhui.
Let’s talk about direct investment first.
Guangdong's state-owned assets took the lead in terms of direct investment amount. The total direct investment amount reached 170.172 billion yuan, far exceeding the 99.487 billion yuan of Shanghai, which ranked second. Jiangsu's direct investment amount was 75.895 billion yuan, ranking third in the country, but the number of directly invested enterprises was among the highest, with 2,490 enterprises, which was on par with Guangdong's 2,467. This means that the investment amount of each enterprise in Jiangsu is much smaller than that in Guangdong.
It is also worth mentioning that in Anhui, Jiangsu and Zhejiang, most of the direct investment funds were invested in enterprises in the province. Among them, the amount invested in enterprises in Anhui Province accounted for as high as 79.32%, which means that 80% of the direct investment amount went to enterprises in the province. In contrast, the amount invested in Hunan Province only accounted for 32.29%. This may be closely related to the local industrial ecology. The local industrial ecology in Anhui Province has formed a clustering effect, while the local ecology in Hunan Province is relatively weak, and investing in foreign enterprises is conducive to attracting local enterprises.
Let’s talk about indirect investment.
In indirect investment, Jiangsu state-owned assets platform ranks first. Whether it is the number of indirect investment events, investment amount or number of invested enterprises, it ranks first. Jiangsu has 8,359 indirect investment events and 6,219 enterprises, which are far ahead of the second place Zhejiang with 5,328 events and 4,319 enterprises. It can be seen that Jiangsu state-owned assets can be called the most generous and active LP.
We also found that from 2019 to 2023, the number of companies that received investment from state-owned capital platforms totaled 19,987 (deduplicated), and currently there are 19,572 companies in existence, indicating that more than 98% of the invested companies are still in operation.
Moreover, only 1,143 enterprises moved across cities, accounting for 5.72%, while non-state-owned institutions invested in 18,291 enterprises, of which 1,515, accounting for 8.28%. This shows that enterprises that received investment from state-owned platforms are more stable and tend to continue to develop locally.
However, from a temporal perspective, the number of enterprises moving across cities has been increasing year by year, which also reflects that the investment promotion effect of state-owned assets is becoming increasingly significant.
The most critical question is where did the state-owned institutions invest?
Conclusion first: Electronic information and medical health are the two fields that receive the most investment; advanced manufacturing, energy and automotive transportation continue to grow.
Let's talk about the electronic information industry first. This field includes five sub-items: semiconductors, software, artificial intelligence, information services, and hardware. In the past five years, electronic information has ranked first, and investment events have accounted for more than 30% of the total. This also means that one out of every three state-owned investments is in the electronic information industry. Moreover, in 2022, the proportion of investment events in electronic information reached 36.53%. It can be seen that it is not an exaggeration that all state-owned assets are engaged in semiconductors (semiconductors undoubtedly account for the majority of them).
Healthcare has always been ranked second, accounting for about 15%-19%. However, healthcare has clearly shown a trend of first growth and then decline, reaching its highest point in 2021, accounting for nearly 20%. There are reasons for the increase in investment from 2019 to 2021. First, in 2019, the Science and Technology Innovation Board allowed unprofitable biotech companies to go public, which added an exit channel for investment in the primary market; second, the impact of the COVID-19 pandemic has stimulated investment enthusiasm in biomedicine.
However, marked by the sharp drop in Hong Kong-listed pharmaceutical stocks in the second half of 2021, investment in the healthcare industry entered a downward cycle, and investment has declined year by year in the following two years. However, as a long-term investment field, state-owned institutions will not lose their attention to the biopharmaceutical industry. Almost all first-tier cities and new first-tier cities have included healthcare as one of the key areas of industrial development.
Let's take a look at the fastest growing advanced manufacturing. In 2019, the proportion of investment events in advanced manufacturing was 8.08%, but by 2023, this figure has changed to 12.52%. In the two major fields related to advanced manufacturing, energy and mining (new energy) and automobile transportation, investment events are also increasing.
This also illustrates a trend: state-owned institutions' "preference" for manufacturing is increasing day by day. This is clearly seen from the capacity expansion projects released by major cities. Chery Automobile's capacity base is located in Qingdao, and BOE's panel project is located in Chengdu. The major projects promoted by these cities have driven investment in leading manufacturing companies and related industry chain companies.
Of course, where there is growth, there is decline. In 2019, consumer investment events accounted for 3.89%, and by 2023 it would drop to 2.32%; in 2019, financial investment events accounted for 3.01%, and in 2023 the figure was 1.72%. The two major areas of consumption and finance have undoubtedly shrunk the most, which is basically consistent with the industry's personal experience.
The above are national statistics. Let's move our focus down to the state-owned assets investment situation in each province.
Overall, electronic information is still the most invested sector in all provinces. Shanghai state-owned assets directly invested in 491 electronic information companies, with a total amount of 35.438 billion yuan. The number of invested companies is twice that of medical and health (223), and the total amount is 3.6 times that of medical and health (9.878 billion yuan). Beijing electronic information invested in 417 companies, with a total amount of 18.445 billion yuan, which is also far more than the medical and health industry, which ranks second.
The investment enthusiasm of the electronic information industry can be seen from the industrial guidance funds established in various places and the IPO data.
Beijing has eight 10 billion-level industry guidance funds, of which 10 billion is invested in the information industry and 10 billion in artificial intelligence. Shanghai has launched three leading industry funds, with an integrated circuit mother fund of 45 billion and an artificial intelligence mother fund of 22.5 billion. Anhui, Zhejiang, Jiangsu and other places have also successively established relevant industry funds.
Among the top 10 companies in terms of A-share IPO fundraising in 2023, four are electronic information (semiconductor) companies, of which the top three areHuahong Company、CoreLink Integration、JINGHE INTEGRATED, which are the largest IPO projects in Shanghai, Zhejiang and Anhui in 2023. Yuntian Lifei, which ranks 10th in fundraising, is also the largest IPO project among A-share listed companies in Guangdong last year.
Of course, there are state-owned institutions directly investing in these four companies. Even Xinlian Integrated Circuit and Jinghe Integrated Circuit were companies initiated and established by local state-owned assets in Shaoxing and Hefei.
Another interesting point about the industry is that the state-owned assets of Fujian Province invested the most in the energy and mining sectors.CATL, Xiamen Tungsten New Energy,Zijin MiningThe energy/mining giants such as Fujian and Fujian Province are closely related. Driven by these leading enterprises, the upstream and downstream industrial chains are gathering in Fujian, and Fujian state-owned assets play the role of capital promoter behind the scenes.
So who is the GP most loved by state-owned capital platforms?
In the past five years, the brand institution that received the most support from state-owned capital platforms was Shengshi Investment, and all of its 49 funds received investment from state-owned capital institutions. Next was CDH Investments, which received 47 funds, and Yida Capital, which received 41 funds.
Shengshi Investment is a venture capital and equity investment fund management institution. One of its major features is to help local governments manage government guidance funds. Its management scale has reached 100 billion. According to CVSoure data, among the LPs of Shengshi Investment, there are 103 state-owned platforms, guidance funds, and government agencies, accounting for 43.05%, which is the largest LP category.
Of course, in addition to the well-known old-line powerhouses such as Shengshi Investment, CDH Investments, and Yida Capital, what surprised me most was that three low-key dark horse institutions squeezed into the top 10. They are Qingsong Capital, Xingcheng Capital, which was established in 2014, and Zhilu Capital, which was established in 2017. The management scale of these three institutions is much smaller than that of the previous three.
Qingsong Capital is an institution headquartered in Qingdao, and half of its LPs are state-owned institutions in Shandong. Shandong Railway Development Fund, Qingdao Dingxin Industrial Investment, Qingdao Urban Investment, Qingdao Pingdu State-owned Assets, etc. are among them. From the perspective of investment targets, Shandong's advantageous industries such as new materials, mechanical equipment, new energy, and medical equipment are the tracks where Qingsong has placed the most bets. For example, Shandong centralized lubrication system supplier IPO in 2023Pangu Intelligence, it received three rounds of investment from Qingsong Capital.
Xingcheng Capital and Zhilu Capital are both investment institutions focusing on the semiconductor field. Xingcheng Capital has invested inChina Micro Corporation、VeriSilicon、ProPlus ElectronicsMore than 40 high-quality semiconductor companies. Among the more than 20 publicly disclosed investments made by Zhilu Capital, all are semiconductor and related industry chain companies, including Broadchip Microelectronics,Huaqin Technology, Lingsheng Technology, etc.
The logic of the top 10 GPs and state-owned LPs is that on the one hand, they value historical performance and management capabilities, and often invest in established institutions of RMB funds. On the other hand, affected by the current industrial policies of various regions, institutions focusing on semiconductors, advanced manufacturing, new energy vehicles and other fields are more likely to be favored.
The full report is as follows:
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