The 19^th China Venture Capital & Private Equity Forum (CVCF) is going to be held in Guangzhou. This enables the construction of the modern financial service system of Guangzhou to reach a new level. On the afternoon of March 15, China Reform Holdings Corporation Ltd announced to establish the China Reform Central Enterprise Operation and Investment Fund of RMB150 billion in Guangzhou. In addition, China Galaxy Financial Holdings Company Limited and China Securities Inter-agency Quotation System Company Limited will establish their southern headquarters in Guangzhou International Financial City. This will inject new driving power for the development of real economy of Guangzhou in the aspects of enterprises’ financing, going public and listing and construction of regional equity market to fully improve radiation ability and influence of Guangzhou as a national major central city.

 

Under the current circumstance with a nationwide hot trend for “mass entrepreneurship and innovation”, Guangzhou also takes a clear-cut stand and proposes to build the “city of venture capital” to greatly promote the development of equity investment organizations and related talents. Relevant data indicated that, in 2016, the added value of the finance industry of Guangzhou reached more than RMB180 billion, up about 12% year-on-year, accounting for 9.3% of the local GDP. This allows the finance industry to become the fifth pillar industry of Guangzhou and also a major force supporting the economic growth of the city. By the end of last year, there had been more than 1,700 venture capital and equity investment organizations, with more than RMB360 billion under their management.

 

The year of 2017 is an important year for the implementation of the 13^th Five-Year Plan and the deepening of the supply side structural reform. What’s more, it is a period with important opportunities for the development of the finance industry of Guangzhou. Taking a lead nationwide to loosen the restriction on registration of equity investment organizations, Guangzhou will attract more famous financial groups to seize the opportunities to establish equity investment organizations here to inject unceasing driving power for real economy and share the dividend from innovative economic development.

 

“To support talents first and then the industry”: cooperation between government and enterprises in cultivating local team of talents engaged in venture capital

 

“I’ve been engaged in venture capital related to science and technology for almost 30 years, with the passion for this industry down to the bone,” said Peng Xingguo, a nearly sixty investment manager who is still working hard in the front line of this field.

 

In 1998, Peng left his position at Guangdong Provincial Science and Technology Committee, which he had been serving for 10 years, to join in Guangdong Science and Technology Venture Capital Company Limited (current a subsidiary under Technology Financial Group) as a founder. In 2015, he left Technology Financial Group and established a PE fund, devoting himself to venture capital (VC) investment in start-up hi-tech projects, which he had worked for at the beginning of his career.

 

 

In the past more than one year, the national venture capital fund established by Peng has reached RMB300 million, and 80% of the investment projects are located in Guangzhou. “The universities and colleges of Guangzhou have many projects featuring excellent technologies and substantial content. The role of venture capital is to provide support for these projects at their difficult times,” said Peng. In accordance with his introduction, the project of micro heat pipe research and manufacturing technologies jointly developed by Guangzhou New Idea Science and Technology Co., Ltd and South China University of Technology, which is one of the projects invested by the fund established by Peng, has recently won the second prize of the National Award for Science and Technology Progress. The products developed under the project solved the difficulties in thermal control of IGBT under the CRRC and Japanese Shinkansen projects.

 

Peng believed that, under such a circumstance that more and more capitals are flowing into innovation and business launch projects, what Guangzhou lacks are not good projects and money but excellent professional venture capital managers. It was learnt that preparation for a local venture capital college is being made under great efforts of the Guangzhou Municipal Bureau of Financial Work. Peng is one of the initiators of the project. He said that the faculty of the college will consist of experts with more than 10 years’ experience in venture capital in Guangdong. The college is expected to provide trainings in this May.

 

“We need to provide support for the industry, especially more support for talent development.” Guangzhou has been following the strategy to give priority to investment in talent development to improve the financial talent service system. In recent years, through a number of platforms, including the OCS, the China (Guangzhou) International Finance Expo and the Southern Talent Market, Guangzhou has introduced a great number of high-level financial talents from home and abroad.

 

Equal attention has been paid to talent introduction and local talent cultivation. At the 2^nd Working Conference of Financial Talents of Guangzhou held early this year, the Guangzhou Municipal Bureau of Financial Work respectively signed strategic cooperation agreements with Guangdong Development Bank, GF Securities, Guangzhou Rural Commercial Bank and the post-doctoral scientific research workstation of Utrust Holding to draw experience from enterprises for talent cultivation and services and extend such experience throughout Guangzhou.

 

Excellent enterprises compete for being “drill ground” and the low-lying land of value sees explosive growth of number of attracted venture capital organizations

 

In 2016, following that IDG located its southern headquarters in Guangzhou, a number of famous investors, including Hugo Shong, founding general partner of IDG Capital, Andrew Yan, managing partner of SAIF Partners, Li Kaifu, founder of Sinovation Ventures, Shen Jin, managing director of Qualcomm Ventures in Greater China, have been engaged as senior economic advisors of the People’s Government of Guangzhou. Guangzhou is open to venture capitals and has attracted many top venture capital organizations home and abroad. Relying on this, it provides a qualified “drill ground” for cultivating local financial talents, especially excellent professional managers in venture capital.

 

Innoangel Fund has had a development in Guangzhou for 10 years, with investment focusing on industry chains in the culture and creative and smart manufacturing industries, aiming to bring complementation and mutual promotion effects between the invested projects. Moreover, the branch of the Little Innoangel Camp in Guangzhou trained 15 talents from Tsinghua, Cambridge and other international famous universities into senior investment managers last year. These senior investment managers have been dispatched to its investment branches all over China. Li Xiaoli, founding partner of InnoCapitals Guangzhou/Zhongshan, said that the foundation of Guangzhou for software development technology enables Guangzhou to see a good development of on-line games, which then silently drive a growth spurt of the culture and creative industry.

 

Tong Hongmei, vice president of Guangdong CSC Business Launch and Investment Management Co., Ltd, agreed with that. She said that many peers in the investment sector mentioned Guangzhou as a low-lying land of value for investment so that there is rare chance to see bubbles with serious deviation from actual value in the start-up stage. She believed that’s why more and more venture capital giants come to Guangzhou to look for opportunities.

 

The following data will better reflect the whole picture of PE funds in Guangzhou: by the end of 2015, there had been 1,077 PE fund management organizations in Guangzhou, up 4.5 times year-on-year, with total fund of RMB212.6 billion, up two times year-on-year; of them, there were 398 newly established PE fund management organizations and venture capital fund management organizations, increasing fund under management by RMB119.5 billion.

 

In addition to making up the “short board” in PE funds, Guangzhou has also made a lot of explorations in innovation of modes of public offering of funds. As one of the earliest Chinese cities exploring to establish government guide funds, Guangzhou had initially formed up a two-level (municipal and district levels) government investment fund system by 2016.

 

It was learnt that, Guangzhou established the venture capital guide fund in 2010 and has allocated fiscal fund of RMB2.4 billion for the industrial transformation and upgrading guide fund of Guangzhou since 2013. Since 2015, the city has allocated fiscal fund of RMB1.5 billion for the industrial development guide fund. So far, a guide fund system covering industrial transformation and upgrading, industrial development, SMEs, science and technology innovation and urban renewal has taken shape at city level to promote supply side structural reform and industrial transformation and upgrading through financial measures. Moreover, Yuexiu District, Tianhe District, Panyu District, GDD and Zengcheng have also established guide funds.

 

In July 2016, with the approval of the Guangzhou Guide Fund Committee, SFUND finished complete equity withdrawal from Hotland Kexin Fund. It was the first successful withdrawal of the venture capital guide fund of Guangzhou, becoming a milestone and benchmark of Guangzhou. SFUND chairman Liu Zhijun said that, since established 17 years ago, the company has managed assets worth more than RMB10 billion and gradually built up a whole-industry-chain investment and financing platform covering operations related to Angel investment, VC, PE, mergers and acquisitions and public offering of fund.

 

Equal attention to policy innovation and platform construction to create a good environment for financial operations, investment promotion and business retaining

 

Capitals flow for benefits. At the same time of attracting the foreign and local venture capital organizations to Guangzhou with the opportunities from an innovative economic development, Guangzhou should also speed up the introduction of various incentive measures.

 

Since 2010, the CPC Guangzhou Committee and the People’s Government of Guangzhou have issued a series of documents, including the Opinions on Promoting Development of Guangzhou’s Equity Investment Market and the Interim Measures for Promoting Standard Development of Guangzhou’s Equity Investment Market, aiming to set up a policy service system, simplify business registration procedures, encourage business innovation, establish platforms for concentrated development and attract a number of equity investment organizations with standard operations and great influence to Guangzhou.

 

It is worth noticing that, last September, under the circumstance that Beijing, Shanghai and Shenzhen stopped the registration of equity investment organizations and PE investment funds, Guangzhou aroused great response in the equity investment and PE investment fund circles nationwide by taking a lead to loosen restriction on related registration. Related responsible person from the Guangzhou Municipal Bureau of Financial Work said that Guangzhou will enhance the support for equity investment organizations this year to encourage such organizations to make investment in enterprises in the Library of Enterprises to Be Listed. In addition, great support will be provided for Guangzhou Equity Exchange to build the venture capital withdrawal platform.

 

Aiming to serve the whole province and extend the influence to South China based on the Pearl River Delta, Guangzhou Equity Exchange has built up a comprehensive service system consisting of 22 services in three categories to further improve the subdivided boards, including the “progress board”, “selection board”, “growth board” and “board of businesses started by young Chinese people”. Huang Cheng from Guangzhou Equity Exchange said that Guangzhou has taken the opportunities for pilot and pioneer programs in the aspect of supporting policies for science and technology innovation. As a regional financing platform, Guangzhou Equity Exchange has introduced many policies and funds for science and technology development. For example, it has launched the cooperation with Guangzhou Science and Technology Innovation Commission to establish the board of science and technology in the selection board to help science and technology enterprises benefit from corresponding supporting policies. “The selection through a market-oriented and code-compliant platform can promote more transparent, fairer and more impartial granting of subsidies for science and technology development and maximize the effect.”

 

In addition to Guangzhou Equity Exchange, Guangzhou has also launched cooperation with Shenzhen Stock Exchange to construct the Guangzhou Sci-Tech Finance Roadshow Center and the cooperation with P5W.net to construct the Guangzhou New Third Board Enterprises Roadshow Center. More regional mutually constructed equity investment platforms can inject more vigor and resources for the science and technology innovation and development of Guangzhou.

 

Last year, the two roadshow centers mentioned above held 10 roadshow activities, serving 50 enterprises preparing to go public and attracting the attention of 3,000 venture capital organizations and listed companies. Incomplete statistics indicated a financing success rate of 45%, including four enterprises listed on the New Third Board and one founder’s business acquired by other company, showing remarkable performance in project and capital matching.

 

Related responsible person from the Guangzhou Municipal Bureau of Financial Work said that Guangzhou has a good environment for equity investment. It has advantages relying on a good foundation for real economy and concentrated innovation enterprises and newly started businesses as well as advantages relying on concentrated financial institutions and social capitals. For equity investment enterprises boasting intensive talents and capitals under management, it is easy to find objectives for investment and raise funds in Guangzhou, because there are very excellent conditions for supporting the development of equity investment enterprises.

 

Source: Translated from Invest Guangzhou, March 16, 2017