Editor's note:

Venture capitalists play a crucial role in linking technologies, industries and the financial sector. The sound development of VCs can facilitate innovation, nurture new quality productive forces and help achieve self-reliance for key technologies. Therefore, the State Council, China's Cabinet, released in mid-June a set of 17 measures to advance the high-quality development of VCs. The measures aim to improve the policy environment and management mechanism covering the whole life cycle of VCs, including fundraising, investment, management and exit.

To better implement the State Council's new measures, the municipal government of Shanghai released guidelines for further promoting the high-quality development of Shanghai-based VCs on July 30, including angel investment funds. The guidelines are scheduled to take effect on Aug 1 and will be effective until July 31, 2029.

1. Major goals

(1) Direct more social capital to VCs in an orderly manner

(2) Step up support for the three pioneering industries of integrated circuits, biomedicine and artificial intelligence

(3) Provide support for the key industries of electronic information, life science, automotives, high-end equipment and advanced materials

(4) Speed up planning in emerging sectors such as the metaverse, green and low-carbon development, digital economy and smart devices

(5) Speed up planning in future-oriented health, intelligence, energies, space and materials industries

(6) Advance the digitalized and green transformation of traditional industries

2. Give leading roles to government investment funds

(1) Strengthen the coordination between local government investment funds and State-backed funds

(2) Complete the continued investment mechanism of government investment funds

- Set up the Shanghai future-oriented industry fund to invest in hard technologies which are still in the early stages of proof-of-concept or pilot testing

- Explore the development of a rolling investment mechanism made up by fiscal funds, income generated by State-owned assets and social capital

(3) Continue the favorable policies under the government guidance funds

- Explore the establishment of a tiered profit concession mechanism for the Shanghai future-oriented industry fund, angel investment guidance fund and VC guidance funds

- Study how to appropriately increase the proportion of capital contributed by government guidance funds to VCs

(4) Optimize the assessment and evaluation mechanism for State-owned capital

3. Facilitate the coordinated development of VCs and the multi-layered financial service system

(1) Strengthen the coordination between VCs and the STAR Market at the Shanghai Stock Exchange

- Build a multi-functional technology investment service platform covering brokerages, loans, and guarantee

- Advance the development of secondary funds

- Improve the service system for transferring fund shares and the price discovery mechanism

(2) Strengthen the coordination between VCs and various financial institutions

- Consolidate the ties between banks, insurers, brokerages, funds, guarantors and other financial service providers

- Give full play to the policy financing and guarantee fund targeting SMEs

- Expand the application scenarios for stock options

(3) Encourage VCs to expand their cooperation between financial asset investment companies

(4) Expand VCs' fundraising channels

- Encourage VCs to seek financing via issuing stocks, bonds and capital trusts as well as raising insurance funds

- Support insurance companies' market-oriented investment in VCs

- Support financial institutions in seeking investment and overseas financing for technologically innovative companies via free trade accounts

(5) Enhance coordination among VC enterprises in the Yangtze River Delta region

(6) Promote the outbound reaches of domestic VCs and introduce more overseas VCs

- Encourage qualified VCs to conduct investment in Hong Kong, Macao and other overseas markets

- Deepen the reform of qualified foreign limited partners program

- Support international investment institutions in setting up onshore RMB funds

- Explore the creation of a pilot program for one-time foreign exchange settlement and sale of RMB funds in which foreign institutional investors participate in shares

4. Promote the integration between VCs and the development of industries and specific regions

(1) Guide the transformation of technological innovation

- Build connections between innovative resources and VCs in key areas such as the Lin-gang Special Area and the Grand Zero Bay

- Encourage government departments and State-owned enterprises to use new technologies and business models provided by startups

(2) Build a special connection mechanism between VCs and the government

(3) Advance the coordination between VCs and incubators

(4) Encourage market-based mergers and integration in key industries

- Encourage qualified companies to conduct mergers and corporate venture capital (CVC) investment

- Support industrial groups and social capital in setting up M&A funds

- Provide facilitation for overseas M&As in key sectors

5. Step up talent and policy support

(1) Speed up the construction of VC clusters and advance talent training

(2) Improve VC registration services and management

(3) Optimize the credit environment for VCs

(4) Strengthen the self-discipline and construction of an industry association for VCs

(5) Complete the VC service system