Fresh measures to enthuse VC sector

Following the government's latest move to promote high-quality development of the venture capital sector in the country, VC firms will be able to better serve technology startups and facilitate new quality productive forces, experts and market mavens said.

The General Office of the State Council released on Wednesday 17 new measures that cover five major themes. These include nurturing more VC entities, expanding capital sources, strengthening regulatory guidance and differentiated supervision, completing exit mechanisms and optimizing the market environment.

Experts from Shenzhen Qianhai Financial Holdings wrote in a report on Thursday that the highlight of the new measures included encouraging industry leaders and research institutes to participate in VC investments, supporting international institutions to set up onshore yuan-denominated funds and giving more play to government-funded VCs.

Qualified VCs are encouraged to issue corporate bonds and use similar financing tools, they said.

In his keynote speech during the opening ceremony of the two-day Lujiazui Forum in Shanghai on Wednesday, Wu Qing, chairman of the China Securities Regulatory Commission, the country's top securities watchdog, said efforts will be made to optimize policies regarding the entire life cycle of VC and private equity firms, covering fundraising, investment, capital management and exit.

More long-term capital will be introduced in the market to invest in small technology companies, such as those specializing in chipmaking and biomedicine, at their early development phase. This will help create a virtuous cycle among technologies, industries and finance, said Wu.

During a panel discussion at the forum, CSRC Vice-Chairman Fang Xinghai said Chinese PE and VC firms have invested in 4,438 projects in the first quarter of this year, with the total investment value contracting moderately to 191.5 billion yuan ($26.4 billion) year-on-year.

The whole-year investment value is expected to be in the range of 800 billion yuan to 1 trillion yuan this year.

According to Fang, PE and VC firms are important in boosting technology innovation. While fundraising is not difficult in China given the country's large deposit size, exits may be a major hurdle for the expansion of PE and VC firms.

To that end, overseas listings can be an option for exits and the CSRC believes that Chinese mainland companies should accelerate the pace of filing their overseas listing applications, said Fang.

"We encourage more Chinese mainland companies to choose Hong Kong as their overseas listing destination," he said.

Ever since China's new filing regulations for overseas listings took effect on March 31 last year, the CSRC has received such applications from 158 Chinese mainland companies as of Tuesday, among which 85 floated on the Hong Kong bourse while 73 went public in the United States, said Fang.

While China has shown much potential in financing technology startups during their early days of development, it should explore more financing channels for these companies when they have entered a later stage of development, said Kevin D Sneader, president of Asia-Pacific Ex-Japan for Goldman Sachs, during the forum.

The introduction of more private capital can be considered when companies enter this further development phase, he said.

Bonnie Y Chan, CEO of Hong Kong Exchanges and Clearing Ltd, said small and medium-sized technology companies usually encounter greater financing difficulties, especially when market liquidity is taken up by several industry behemoths.

"An effective market should be able to provide financing to companies of different sizes," she said.