On Dec 29, the General Office of the Shanghai Municipal Government issued a notice introducing a document titled Several Measures to Further Promote the High-Quality Development of the Equity Investment Industry in Shanghai. Comprising nine sections and 32 articles, the document is scheduled to take effect on Feb 1, 2024 and will remain effective for five years until Jan 31, 2029.

Objectives of the document

The document seeks to unleash the potential of equity investments in supporting the real economy and driving technological innovation.

Its key objectives include:

(1) Improving and streamlining services throughout the entire life cycle of equity investment, from fundraising to investment, management and exit.

(2) Establishing a benchmark for investing in early-stage, small-scale and technology-driven projects.

(3) Cultivating an environment where the government takes a leading role in equity investments, with institutions following suit.

(4) Attracting a greater number of investment institutions to establish a presence in Shanghai for long-term development.

(5) Contributing to the collaborative development of Shanghai as both an international financial center and a hub for technological innovation.

Propelling technological innovation

The document focuses on attracting more investment institutions to Shanghai and guiding more capital to invest in technology firms.

The city will:

(1) Study the establishment of a technology innovation guiding fund, which will focus on investing in early-stage science and technology innovation projects.

(2) Establish a specialized service platform for angel investments to strengthen the discovery, investment and incubation of high-quality early-stage science and technology innovation projects.

(3) Formulate incentive policies for investing in early-stage, small-scale and technology-driven projects.

Facilitating investment exits

The document specifies channels for equity investment exits.

The city will:

(1) Enhance the efficiency of investment exits through mergers and acquisitions exits.

(2) Facilitate both domestic and overseas listings for companies.

(3) Enhance the functionality of the platform for transferring shares of equity investment funds.

(4) Drive the robust advancement of secondary funds:

- Encourage diverse entities in Shanghai to initiate and establish these funds;

- Create a green channel for their establishment or relocation to areas with a concentration of equity investment institutions;

- Offer supportive policies to facilitate their smooth establishment and operation;

- Encourage banks' wealth management, insurance funds, trust funds, State-owned parent funds and others to increase investment in secondary funds.

(5) Pilot the physical distribution of stocks for equity investment funds: Facilitate off-market transfers to the fund investors of eligible shares held by the equity investment funds before the initial public offering of the listed companies.

Building an international hub for equity investments

The city will:

(1) Support domestic and overseas listings of equity investment fund management companies;

(2) Encourage equity investment institutions to issue bonds;

(3) Further bolster the Qualified Foreign Limited Partnership pilot program: Advance innovation in the pilot program, expand its investment areas and methods, and facilitate institutional investors such as sovereign wealth funds, pension funds, charitable funds, university funds to invest in real economy enterprises through the pilot program.