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author: jia yongmin

academic advisor, institute of balance

special researcher, interdisciplinary center, zhejiang university

on august 30, e fund nasdaq 100 etf linkage fund released its interim report, which disclosed the top ten holders of the fund. changzhou investment group co., ltd. was the fund's largest holder.

e fund nasdaq 100 etf tracks the nasdaq 100 index, which is composed of the 100 non-financial industry stocks with the largest total market capitalization listed on the nasdaq exchange and is a representative index for technology growth companies. simply put, changzhou investment group indirectly invested in the us nasdaq index by purchasing "e fund nasdaq 100".

plan ahead four years and double the investment

relevant information shows that changzhou investment group co., ltd. is a wholly state-owned company with a registered capital of 1.2 billion yuan. it is the industrial investment platform and state-owned capital operation platform of the changzhou municipal government.looking upwards at the shareholding structure, the largest shareholder is the changzhou municipal people's government, with a shareholding ratio of 90%; the remaining 10% of shares are held by the jiangsu provincial department of finance.

in terms of organizational structure, changzhou investment group co., ltd. has four investment management departments, which are responsible for the subscription of non-public offerings of listed companies, venture capital business, strategic investment in well-known domestic equity investment funds, and secondary market stock trading.

specifically for venture capital business, changzhou investment group mainly invests in emerging industries such as new energy, new materials, high-end equipment manufacturing, biotechnology and new medicines, "supporting scientific and technological innovation and promoting the optimization and upgrading of changzhou's local industrial structure."

in order to maintain and increase the value of state-owned assets and diversify investments, changzhou investment group co., ltd. has held the fund since june 2020 and has held it for four consecutive years. it has purchased a total of 3.3706 million shares at an average price of 1.53 yuan and an investment amount of 5.1584 million yuan. the latest price is 3.16 yuan, with a market value of 10.8198 million yuan, doubling in four years.

changzhou investment group co., ltd. is the largest on-exchange shareholder of the fund, accounting for 5.92% of the total listed shares. however, the investment amount of this fund accounts for a very low proportion of the entire changzhou investment group co., ltd.'s external investment. the investment amount of 5.1584 million yuan accounts for less than 0.5% of the group's similar investments.

taking such a small risk, the proportion is very prudent, and the return is doubled. from an investment perspective, there is nothing wrong.

is government investment in u.s. stocks “capitalizing the enemy”? this understanding is too superficial

but as a government, its actions cannot be based solely on “profit or not”. before that, the question that needs to be answered is: is this right? for example, is this taking money to “aid the enemy”?

theoretically, when more funds flow into nasdaq, it will definitely stimulate stock price increases and bring more funds to nasdaq-listed companies. among these companies, there are chinese companies, but they are mainly american companies. therefore, from the narrowest point of view, it is reasonable to accuse them of "funding american technological innovation" and "funding the united states to strangle china".

however, this conclusion is too simplistic and even narrow-minded.

there are 3,341 listed companies on nasdaq, of which 245 are chinese companies.among them are china mobile, china telecom, cnooc, china national petroleum corporation, china life, china unicom, and sinopec, as well as private and technology companies such as melco crown entertainment, suntech power, focus media, netease, smic, baidu, ctrip, and sina.

overseas listing is an important part of the opening up of the capital market, which helps expand financing channels, enhance international influence and competitiveness, and has positive significance for chinese companies to integrate into global development. from the china securities regulatory commission to local governments, a series of policies have been introduced to support companies' overseas listing.these listed companies have also promoted the prosperity of the us capital market. so, obviously, it cannot be said that listing in the us is right and investing in the us is wrong.

in fact, being able to invest in foreign capital markets is a national institutional arrangement: qdii, or "qualified domestic institutional investor". this refers to an institutional arrangement established in china, approved by relevant departments, to allow domestic institutions to invest in stocks, bonds and other securities in foreign capital markets in a controlled manner under the conditions that the rmb capital account is not convertible and the capital market is not open.

the establishment of this system allows domestic investors to directly participate in foreign markets and obtain global market returns. it is also conducive to making the rmb exchange rate more balanced and market-oriented, and reducing trade surpluses and capital account surpluses.

therefore, the actions of the changzhou government are correct in terms of investment and also politically.

"using chinese money to buy american stocks" is most likely to make people think of china buying american debt. in fact, in chinese public opinion, there are many questions such as "is buying american debt equivalent to aiding the enemy?" and "what if the united states defaults on its debt?" china has always been the second largest overseas creditor of american debt.in june, china increased its holdings of u.s. treasuries by us$11.9 billion (approximately rmb 85.4 billion), bringing its total holdings to us$780.2 billion.

however, there is a difference between local governments buying nasdaq index funds and the central bank buying u.s. bonds. the key difference lies in the risk.

u.s. treasury bonds are equivalent to risk-free investments, while investing in u.s. stocks has certain risks. so essentially, the problem with local governments buying the nasdaq index is that it is a risky investment. if there is a loss, who will be held responsible?

when this question is asked, a more absurd logic emerges: if it is purely from an investment perspective, buying the nasdaq index may be less risky than investing in domestic science and technology companies.so, what should the government do?

therefore, it feels awkward for changzhou investment group to buy the nasdaq index. many people think it is because it bought american stocks, but in fact it is because the government’s role has been expanded to include the task of “making money directly”.

changzhou government's investment diversification efforts are worth encouraging

in recent years, the hefei model has become popular. many cities have copied it and rushed to invest state-owned capital in emerging industries. hefei and weilai have cooperated in the past, and many cities have invested in new energy vehicle companies. on a larger scale, the "investment bank" and "venture capital" of urban local governments means that the government has established industrial investment funds, using "investment" instead of "attraction" to attract star companies and projects to settle down, with the aim of driving industrial upgrading and boosting economic growth.

however, it may be too early to draw conclusions now.

recently, false information that "nio has declared bankruptcy" suddenly appeared on the internet. although the rumor was later refuted, there is no smoke without fire. in 2023, nio's net profit attributable to its parent company was as high as 21.15 billion yuan, a year-on-year increase of 45%. according to statistics, from 2018 to 2023, nio's cumulative losses reached 86.63 billion yuan.

nio has not shown any signs of reversing the trend. in the first quarter of 2024, nio achieved operating revenue of 9.91 billion yuan, a year-on-year decrease of 7.2%; net loss of 5.18 billion yuan, a year-on-year increase of 9.4%; and delivered 30,000 new vehicles, a year-on-year decrease of 3.2%.

although li bin, ceo of nio, said: "it has been less than 10 years since our establishment, and it took tesla 16 years from its establishment to profitability."

however, the current technical development stage of new energy vehicles is completely different. it is no longer the initial stage of electric vehicle technology, but has entered the stage of mature production capacity competition. since the beginning of this year, the prices of new energy vehicles in shenzhen have generally fallen, with a drop of about 5%-10%.

data from the china association of automobile manufacturers shows that in 2023, the domestic automobile industry's profit margin was 5%. from january to april 2024, the automobile industry's profit margin further declined to 4.6%.

the reason behind the price war and profit decline is overcapacity. in 2023, the capacity utilization rate of new energy vehicles will be only 57.47%. the new energy vehicle industry has an industry trend of underutilization of overall capacity, which is due to excessive planning and investment capacity. the reason is that in addition to the market-oriented financing boom, state-owned assets and local governments have also promoted this trend.

according to the "14th five-year plan" of various provinces and cities, projects under construction and production capacity plans of automobile companies, by 2025, my country's total production capacity of new energy vehicles is expected to reach 36.61 million vehicles, nearly four times the production and sales in 2023.

in this context, it will take a longer time to evaluate nio and hefei, and on a larger scale, to evaluate the model of the government turning into an investment bank and the government turning into venture capital.

china's development over the past few decades has been under the background of strong government leadership and technology transfer. because the technology transferred is mature and has been screened by the market, the technology recipient knows the technical and economic rationality of highways, subways, power plants, dams, nuclear power plants, textile mills, steel mills, and even joint-stock systems and stock markets. as long as they start to build, they can do it in large quantities and at a high speed, without trial and error, and without loss of efficiency.

it must be pointed out that this model of government-led economic development, using fiscal resources to subsidize and invest, actually has four prerequisites:

first,the technological direction is clear. there is no uncertainty in highways, power plants, etc., and it will definitely be beneficial to economic development.second,technology is mobile and it is easy to obtain the latest international technology;third,these government-led projects are more inclined towards applied technology.fourth,the global market is open. under these four premises, most large-scale infrastructure projects or corporate projects led by the government are successful.

however, the rapid development over the past 20 years has allowed china to step out of the stage of purely receiving technology transfer to a certain extent and reach the threshold of another turning point. now the entire environment has undergone profound changes. for example, photovoltaics and new energy vehicles still have some of these characteristics, so they are basically successful. but it is precisely because of the partial loss of these characteristics that they are now encountering some difficulties.

so, can past experience still cope with future problems? are the "big infrastructure" model and the "big venture capital" model still effective?we need to think about these issues and correctly position the government's role in innovation and economic development in the next stage.

this article is an original article specially commissioned by the phoenix news commentary department and only represents the author's views.

editor: liu jun