On November 15, the first day of Guangzhou Innovation and Business Launch Exhibition, the inauguration ceremony for the Guangzhou Industrial Transformation and Upgrading Fund (hereinafter referred to as Guangzhou Industrial Fund), which totals RMB37.5 billion, was held. It is Guangzhou’s first equity investment fund that focuses on industrial transformation and upgrading. Chen Jianhua, director of the Standing Committee of the People’s Congress of Guangzhou, Zhou Yawei, member of the Standing Committee of the CPC Guangzhou Committee, Zhao Junming, director of the Industry of Information Technology Commission of Guangzhou Municipality, and Han Ying, chairman of Guangzhou Fund, attended the ceremony.

 

It was learnt that, Guangzhou Industrial Fund made a breakthrough by adopting the corporate operation mode. Specifically, financial fund of RMB1.5 billion was used as fund of funds (FOF) to establish the Guangzhou Industrial Transformation and Upgrading Fund Management Co., Ltd, which is wholly owned by Guangzhou Fund in the form of capital fund. Operated as an independent legal entity, the fund can be recycled so that the scale of available fund can be expanded level by level. Moreover, in a proportion of not lower than 1:2, the FOF will absorb capitals of more than RMB36 billion from 12 financial institutions, including banks and insurance and trust companies.

 

Traditionally, financial funds are allocated as special funds directly invested in specific businesses and projects. So, the size of such funds cannot be expanded, and the size of investment and influence are also limited to some extent. Experts in this field believed that the establishment of the government guide fund will give full play to the leverage role of financial fund to mobilize the financial and social capitals to jointly support business entities and realize effective complementation between the government and the industries. On the site, Guangzhou Fund and 12 financial institutions, including China Construction Bank, Pearl River Life Insurance and Ping An Trust, signed strategic cooperation framework agreements, based on which the government guide fund of RMB1.5 billion will absorb financial capitals of RMB36 billion. This marks the start of Guangzhou to comprehensively and deeply promote industrial transformation and upgrading.

 

Zhao Junming said market-oriented operation is the major trend of government guide fund in the future. However, there are still huge challenges for fully mobilizing social capitals to participate in it on the premise of guaranteeing the flexibility of market and the guiding role of policies. Guangzhou Industrial Fund adopts an operation mode based on FOF to give full play to the guiding effect of financial funds. It enlarges the equity investment of enterprises through cooperation with sub-fund management institutions and is highly motivated to promote the progress of reform of state-owned equity investment institutions for “diversified ownership”. It is making explorations for new modes for an integrated development of state-owned and private capitals to accelerate the realization of the strategic objectives for the industrial transformation and upgrading of Guangzhou.

 

Li Rongjun, president of Guangzhou Branch of Shanghai Pudong Development Bank, said, “The establishment of the guide fund for industrial development of Guangzhou not only provides an opportunity for the industrial transformation and upgrading of Guangzhou, but also provides an opportunity for the transformation of banks. From a long-term perspective, the government guide fund will improve the regional financing and investment environment.”

 

Han Ying, chairman of Guangzhou Fund, said that it is expected that, by the end of 2016, the scale of the sub-funds of Guangzhou Industrial Fund will have reached about RMB10 billion, which will be mainly invested in the innovative fields for the industrial development of Guangzhou, covering a number of enterprises engaged in new IT, high-grade numerically-controlled machine tools and robots, ocean engineering equipment and high-tech ships, advanced rail transit equipment, energy-saving and new-energy-driven vehicles, electrical devices, new materials, bio-medicine and high-performance medical devices.

 

Source: Translated from Invest Guangzhou