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this is not only about "patient capital", but also about

changes in the way and depth of government involvement in economic activities

according to the "fair competition review regulations" that came into effect on august 1, local governments can no longer implement subsidy policies such as tax refunds and land transfer fees. previously, when local governments were "competing for policies" to attract investment, most of the competition was for these subsidy policies.

regarding this regulation, a company leader said in an interview with me that he didn't understand why local governments were not allowed to "compete in a market-oriented manner." i was a little surprised. isn't government subsidy the opposite of "marketization"? of course, i can understand that in the past, competition between local governments was considered one of the key factors driving china's rapid economic growth and had natural legitimacy.

but i don’t think entrepreneurs need to worry about the end of competition. just before august 1, several provinces had announced the establishment of government investment funds worth tens of billions or even hundreds of billions of yuan. one of the purposes was to deeply bind local governments and enterprises through investment and achieve “fund investment attraction”.

government investment funds, including government-guided funds and mother funds, are not new, but in recent years their goals have become more inclined towards attracting investment. especially after the "back door" of local governments abusing fiscal funds to subsidize enterprises was blocked, fund investment is regarded as one of the few "front doors". local governments with strong financial resources and familiarity with the operation of government investment funds will gain more advantages in attracting investment. someone from an equity investment institution told me that compared with fiscal subsidies, equity investment may see "return money", which will directly feed back to the local government's finances, which is another incentive for fund investment.

in mid-august, the state council issued the regulations on regulating the services provided by intermediaries for public offerings of stocks (draft for comments), which explicitly stopped local governments from issuing "listing incentives". the number of listed companies in a place is often used to measure the level of local economic activity, and local governments naturally hope to have more listed companies. although the "listing incentives" have been stopped, more and more local governments have become investors in companies, and listing is an important way to exit investment. local governments' desire for listing is probably increasing, and this time they are more direct stakeholders.

it is precisely because government investment funds have other goals besides capital preservation and appreciation that when we talk about the "change in venture capital", it is not only about how government investment funds can become "patient capital", but also about the change in the way and depth of government participation in economic activities. the boundary between the government and the market has changed again. what kind of profound changes will this bring us?

published in the 1154th issue of china newsweek magazine on september 2, 2024

magazine title: how to make government investment funds really patient

author: chen weishan

editor: huang wei

operations editor: xiao ran