Editor's note: On October 24, the "Action Plan for Promoting High-Quality Development of Venture Capital" was officially released in Shenzhen, which is the first city to propose the development of "bold capital" in China. The "Action Plan" also states that by 2026, Shenzhen aims to further strengthen its multi-level capital market and venture capital advantages, to become a hub for innovative, patient and bold capital developments that are also connected to Hong Kong and Macao. What positive impacts will this move have on China's capital market?
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang.
On October 24, the "Action Plan for Promoting High-Quality Development of Venture Capital" was officially released in Shenzhen, which is the first city to propose the development of "bold capital" in China. The "Action Plan" also states that by 2026, Shenzhen aims to further strengthen its multi-level capital market and venture capital advantages, to become a hub for innovative, patient and bold capital developments that are also connected to Hong Kong and Macao. What positive impacts will this move have on China's capital market? To discuss this topic, we have invited: Gao Yuning, Associate Professor at Tsinghua University's School of Public Policy and Management; Tan Haojun, financial commentator and part-time professor at Zhongnan University of Economics and Law; and Guo Hanbing, researcher at the Institute of Finance, Chinese Academy of Social Sciences, to provide their insights and analysis. Welcome, everyone!
【Anchor】The "Action Plan" proposes the development of "bold capital," supporting state-owned funds to boldly experiment and make mistakes. First, I would like to ask Mr. Gao, is this positive guidance for the overall construction of investment fault tolerance and due diligence exemption mechanisms?
Strategically, I believe that the bold capital proposed by Shenzhen is a very typical implementation of the Third Plenum's decision to develop new productive forces according to local conditions.
Why is it proposed by Shenzhen now? It's precisely because Shenzhen is currently the most innovative and vibrant region of reform and opening-up. Therefore, the proposal of bold capital, on the one hand, is equivalent to giving these funds or the entire fund greater flexibility within the system. On the other hand, it is also encouraging for government funds, investment funds, and guiding funds to better seize the development opportunities of strategic and cutting-edge industries. So, I think this bold capital, in fact, has clear directions and considerations in both aspects.
【Anchor】Yes. Ms. Guo, in your view, how should we interpret the new notion of "Bold Capital"? Compared to previous concepts like "Long-Term Capital" and "Patient Capital" what does the introduction of "Bold Capital" bring?
The introduction of "Bold Capital" represents a breakthrough in traditional investment concepts. It is not only about capital investment but also a bold attempt to invest in innovation and high-risk areas. For investment decisions, we believe that "Bold Capital" will enter fields with enormous potential andhigh uncertainty, such as frontier technologies and emerging industries. Compared to concepts like Long-Term Capital, Patient Capital, and Strategic Capital, "Bold Capital" signifies a more proactive and risk-taking approach.
【Anchor】Alright. With the launch of this "Action Plan," Mr. Gao, do you think this will further drive a rebound of investments in China's primary market?
I believe that the introduction of "Bold Capital" has both strong demonstrative and mobilizing significance. If this series of trial runs are successful, it will certainly create a positive demonstrative effect for regions with more in-depth reform needs, such as the Yangtze River Delta zone. So, I think the overall impact of "Bold Capital" on the primary market might be gradual, but it would be strong and clear.
In the short term, I think there will be a gradual process to provide such space or strength. It is unlikely to fully open up and implement "Bold Capital" all at once. However, I believe that in the medium term, if good experiences and practices emerge from early trials, It would certainly be beneficial for the confidence and activity level of the entire primary market once it fully rolls out.
【Anchor】Alright, Mr. Tan, Shenzhen proposed to "strive to form a trillion-level government investment fund group." this time. What do you think about the scale of funding?
The Bold Capital initiative introduced by Shenzhen, with a scale of the trillion level, fully demonstrates that Shenzhen is a city willing to take risks and is indeed very ambitious. If this initiative can be effectively utilized, the results will be significant. It will not only generate direct driving effects but also create good pull effects, enabling national state-owned capital to exert more powerful influences.
【Anchor】The "Action Plan" also mentions that the goal of forming a trillion-level government investment fund group is set for 2026, which is within the next two years. Ms. Guo, how do you view this timeline?
This timeline seems relatively short, but it reflects Shenzhen's determination and ability to act. Although the timing is tight, Shenzhen has a solid economic foundation, an innovative environment, and robust talent resources, so I believe it has the capacity to achieve this goal in a short time. First, setting a target in a short timeframe will certainly prompt the government and relevant departments to accelerate policy formulation and fund-raising efforts, improving work efficiency. At the same time, this sense of urgency will attract more social capital to participate, forming a synergy to promote the development of Bold Investments. This two-year period provides the market with a clear expectation, allowing businesses and entrepreneurs to effectively plan and prepare.
【Anchor】What do you think of this timeline?
In the past, many of our medium-term plans were guided by our five-year plans, right? This means that either we conclude by 2025, or we look at the period from 2026 to 2030. However, previously, we have observed, to some extent from various channels, that if all action plans are confined within a five-year framework, it can sometimes lead to investment surges or overly strong cyclical patterns. Currently, I believe this planning allows the agenda to span from the end of the 14th Five-Year Plan into the early stages of the 15th, which may stabilize the overall economy.
Additionally, there is another implication: the series of reform goals set by the recent Third Plenary Session are expected to be completed by 2029. This means that there is a consideration for a two-step approach, where 2024 to 2026 being the first step, and 2027 to 2029 being the second. Therefore, through the pilot programs from 2024 to 2026, if a series of reforms and trial projects are successful, then from 2027 to 2029, these can be promoted and matured to a larger scale.
Therefore, I estimate that there are two main considerations behind this.
【Anchor】Good. Shenzhen is once again playing the role of "pioneering and experimenting." Mr. Gao, how do you view this?
The reason for choosing Shenzhen as the trailblazer is due to its strong industry presence and conducive environment. Additionally, Shenzhen's characteristics differ from regions like the Yangtze River Delta zone, which has more mature manufacturing systems, and Beijing, which is known for its internet and technology sectors. Furthermore, Shenzhen is more aligned with strategic industries and key manufacturing sectors, particularly in innovation clusters. Shenzhen's industrial structure and environment make it particularly suitable for venture capital investments.
Being part of the Greater Bay Area and a typical innovative city, Shenzhen has industrial characteristics that align well with addressing bottlenecks and critical segments of the industrial chain. Therefore, the call for bold capital is closely related to its current characteristics.
【Anchor】Yes, the "Action Plan" also leverages Shenzhen's proximity to Hong Kong and Macao to propose multiple directions for nurturing long-term and patient capital. This includes a "Shenzhen commercial bank + Hong Kong investment bank" model to provide combined equity and debt financing services for tech companies. Mr. Tan, how do you view the potential impact of these measures on future cooperation between Shenzhen and Hong Kong?
The proposal of bold capital aiming to reach one trillion in two years is a significant boost for both Shenzhen and Hong Kong's stock markets. Related concept stocks will likely respond positively, and if investors seize the opportunity, it could be a good chance for them. If investors adopt a medium- to long-term investment mindset, they can invest in stocks in the TMT (Technology, Media and Telecom) sector, as well as innovation-driven stocks, which would increase the likelihood of making profits.
【Anchor】The "Action Plan" also mentions supporting Hong Kong private equity funds (LPF) to establish qualified foreign limited partnerships in Qianhai, further attracting international capital. Mr. Gao, how do you think this might influence the integrated development of the Guangdong-Hong Kong-Macao Greater Bay Area?
The Greater Bay Area has been exploring a series of attempts to coordinate its 4Djudicial systems, especially in the Qianhai area. If they were able to draw upon some aspects of Hong Kong's listing and judicial system to conduct relevant trials, the introduction of the Shenzhen Commercial Bank and Hong Kong investment bank model will further promote institutional integration, particularly in the finance and investment sectors.
In other words, if we can leverage Hong Kong's investment banks and direct financing methods to channel investments into Shenzhen through Qianhai, it would effectively enable our overseas capital—particularly those looking to invest in and participate in the development of high-tech or strategic industries and new productive forces in mainland China—to form a more institutionalized and effective cooperation channel. I believe this represents a particularly good and bold attempt at innovation.
I believe that this will likely further promote the overall financial integration of the Greater Bay Area, as well as enhance the connectivity of overseas capital channels. By effectively utilizing these capital resources, we can optimize their application. It suggests that bold capital isn't just about mainland capital; it aims to utilize global capital through the Greater Bay Area mechanisms to foster innovative industries in Shenzhen, making it a notable endeavor.
【Anchor】Good. Some venture capital insiders say that when venture capital thrives, industries flourish, and when industries flourish, cities become stronger. I would like to ask Mr. Gao, what changes do you foresee for the venture capital industry with the introduction of the "Action Plan"?
During previous periods, the venture capital sector was significantly impacted by various external factors, including the pandemic. The entire capital market was sluggish for quite some time before the new economic policies were announced. We can see that since 2019, the gap between China's unicorn companies and those in the United States started to widen again. I believe this is related to the broader internal and external environment at the time.
However, the "Action plan" of Shenzhen indicates a desire for both state-owned and government-led funds to participate in the venture capital and startup ecosystems. This could help create a more positive and organic commercial ecosystem within the venture capital sector. In the process of forming the industry ecosystem, so-called China's"risk investment government" or "risk investment country" model that external media have mentioned, will be more dynamic and willing to invest in strategic economic sectors. For Shenzhen, it represents a particularly good trend for its long-term sustainable industries, as well as a new source for regional development and even fiscal growth.
【Anchor】Yes. Mr. Tan, how do you think the implementation of the "Action Plan" will affect the entrepreneurial ecosystem in Shenzhen and across the country?
To achieve high-quality development, it is essential to accelerate economic transformation and structural adjustment, to enhance Chinese enterprises' ability to cope with external environmental pressures and to improve the market ecology, industrial ecology, and development ecology.
The establishment of Bold Capital in Shenzhen is an exploration and innovation, and I believe it will positively impact the entire market and industrial ecosystems. Once the effects become evident and we start to see more tangible improvement in more areas, the Bold Capital will grow and drive greater spillover effects.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
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