Ministry of Finance and National Development and Reform Commission, Tentative Measures for the Administration of Funds for Equity Participation in Venture Investment by the Venture Investment in Emerging Industries Scheme

财政部、国家发展改革委员会新兴产业创投计划参股创业投资基金管理暂行办法

October 12, 2011 | BY

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Central government finances may directly invest in venture investment enterprises.

Clp Reference: 2110/11.08.17 Promulgated: 2011-08-17 Effective: 2011-08-17

Promulgated: August 17 2011
Effective: as the date of promulgation
Interpreting authorities: Ministry of Finance and National Development and Reform Commission

Applicability: The term “venture investment in emerging industries scheme” refers to the fostering and promotion of the development of emerging industries by funding of central government finances through direct investment in venture investment enterprises and equity participation in venture investment funds.

The phrase “funds for equity participation in venture investment” means that central government finances allocate funds from dedicated funds such as the research and development funds for industry technology, together with funds from local governments and private capital, to jointly establish by promotion venture investment funds or to participate in existing venture investment funds by way of capital increase (Equity Participation Funds) (Article 2).

Main contents: Each Equity Participation Fund shall focus on investing in strategic emerging industries and improvement in high and new technology to enhance traditional industries such as: energy conservation and environmental protection, information technology, biological and new pharmaceuticals, alternative energy, new materials, aviation and aerospace, marine sector, manufacture of advanced equipment, automobiles using alternative energy, and high technology service industries (including information technology, biotechnology, research and development design, inspection and testing, and services for practical application of scientific and technological achievements) (Article 7).

Equity Participation Funds may not engage in the following businesses:

(i) investment in listed enterprises, except for shares in non-listed enterprises that, subsequent to listing, have not been transferred or the portion privately placed;

(ii) provision of security, mortgage and entrusted loans, and real property business (including purchase of real property for self-use);

(iii) investment in other venture investment funds or enterprises with an investment nature;

(iv) investment in stocks, futures, enterprise bonds, trust products, wealth management products, insurance plans and other financial derivatives; and

(v) issue of trusts or pooled wealth management products to raise funds (Article 8).

The total amount raised for each Equity Participation Fund shall be at least Rmb250 million. The registered capital or net assets of the main promoter, and the amount of capital contribution of the local governments shall respectively be at least Rmb50 million. The aggregate amount of capital contribution of the capital contributors other than central government finances and local governments shall be at least Rmb150 million, and the amount of capital contribution of each single capital contributor other than the management institution of the Equity Participation Fund shall be at least Rmb10 million. The number of capital contributors other than government capital contributors shall in general be between three to 15 (Article 15). The capital contributed by central government finances to each Equity Participation Fund shall in principle not exceed 20% of the registered capital of the fund or the amount of capital contribution undertaken. Such capital shall be contributed and withdrawn together with the funds from local governments (Article 28). The term of Equity Participation Funds shall not exceed 10 years in principle. Investment shall generally be withdrawn through settlement upon expiry, repurchase by public shareholders and transfer of equity (Article 29).

Related legislation: PRC Law on Promoting the Practical Application of Scientific and Technological Achievements, May 15 1996, CLP 1996 No.6 p.10; Decision on Accelerating the Fostering and Development of New Strategic Industries, Oct 10 2010, CLP 2010 No.9 p.30; and Several Policies on Promoting the Commercialisation of Indigenous Innovation Achievements, Dec 15 2008

clp reference:2110/11.08.17promulgated:2011-08-17effective:2011-08-17

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