Startups have caught the eye of the Chinese government as the State Council decided to set up a 60 billion RMB ‘National SME Development Fund’ specially targeted at startups or SMEs in their seed / early stage. The government is to provide 15 billion RMB, the rest will be provided by companies and institutes.
Compared with large state-owned or stock listed enterprises, SMEs often lack own funds and have difficulties getting financing from regular financial institutions. The new fund should address this problem, but will indirectly also increase employment opportunities at those funded SMEs. The Chinese government is well aware there is already a substantial VC and PE market in China, this is also the reason why the fund is focused on seeds.
In the past the Chinese government has created several funding mechanisms, either to promote a quick industrial catch-up, to create national champions, or to stimulate innovation amongst existing SMEs. What makes this fund different is that it is a country version of a seed fund. CPPCC National Committee member and economist Lian even called it the “Dream Fund”, likely referring to the vision many entrepreneurs have of building the next Xiaomi or BYD.
It is not entirely clear yet who or how the fund will operate, as commercial parties will be involved but the State Council will definitely continue to play a role.
You can think or say a lot about the Chinese bureaucrats in Beijing, but they do put their money where their mouth is when it comes to believing in innovation and entrepreneurship.
Featured image: David Dennis / 100 Yuan