Building an ecosystem combining capital and innovation
From: Shenzhen Municipal Talent Affairs Bureau
The venture capital industry serves as a booster promoting technological innovation and cultivating emerging industries. In recent years, Shenzhen has promulgated the country's first local venture capital regulations and established a series of capital investment and financing mechanisms, such as an over-100-billion-yuangovernment guidance fund and the Shenzhen Angel FOF policy fund, as well as another fund focusing on innovation and entrepreneurship for talented human resources. A market-oriented ecosystem for technology and finance firms that takes enterprises as its main body and features the deep integration of industry, education, and research has been built, assisting Shenzhen in becoming an international venture capital center.
The city has already set up the 10-billion-yuan Shenzhen Angel FOF and the 10-billion-yuan Shenzhen Talent Innovation and Enterprise Fund. Established in 2018, the former is a strategic policy fund initiated by the Shenzhen Municipal People's Government. It uses the "risk inferior" mechanism to stimulate private capital to invest in early-stage companies, small companies, and those that possess key and core technologies. The fund has invested in 32 companies that have the potential to become unicorns within three years of its establishment.
The Shenzhen Talent Innovation and Enterprise Fund was created in 2017. It has since set up three equity investment funds to promote the healthy growth of entrepreneurial projects launched by talented personnel. The No. 1 equity investment fund, with 6 billion yuan at its disposal, ranks as the largest. It has invested in 29 projects since it was established just over three years ago, and more than 70% of the companies it has invested in fall into the category of possessing key and core technologies. Among them, Chipscreen Biosciences, Lifotronic, and JPT Opto-electronics have been listed on stock markets.
Shenzhen's private equity fund industry started early and has seen robust growth. Both the number of institutions and products, and the amount of managed funds in Shenzhen are unmatched anywhere in the country. By the end of 2021, the total amount of private equity funds in Shenzhen reached 2.27 trillion yuan. The private equity institutions in Shenzhen have invested in more than 4,300 local companies, pouring nearly 400 billion yuan and 300 billion yuan into small and medium-sized enterprises and high-tech enterprises, respectively. There are more than 950 funds dedicated to mergers and acquisitions in Shenzhen, which have pooled equity capital of about 400 billion yuan for the real economy and helped more than 500 companies get listed on the domestic stock markets.
1. Supporting venture capital institutions to develop in Shenzhen
In order to mobilize more social capital to keep ramping up investment in key areas of Shenzhen’s economy and create an international venture capital center and innovative capital formation hub, the Shenzhen Municipal Local Financial Regulatory Bureau issued the “Measures for the Sustainable and High-quality Development of Venture Capital in Shenzhen.” The measures encourage venture capital institutions to settle in the city while also supporting the development of key venture capital institutions. Moreover, they guide venture capital to invest in early-stage and small companies, especially technology firms, and stimulate angel investment while offering incentives in terms of office space, talent development, and so forth.
Main policy terms and applicable conditions:
The single reward for a newly established venture capital enterprise is capped at 20 million yuan. Within three years of its establishment, a reward of 5 million yuan will be given to the management company of the enterprise for every 400 million yuan (or the equivalent in foreign currencies) it has invested in non-listed enterprises in Shenzhen. The maximum amount of a single reward shall not exceed 20 million yuan.
The reward for a newly established private securities investment fund management enterprise is capped at 5 million yuan. If the fund managed by the enterprise reaches 10 billion yuan (or the equivalent in foreign currencies), it will be granted a reward of 3 million yuan; if the fund managed by the enterprise reaches 20 billion yuan (or the equivalent in foreign currencies), it will be eligible for a reward of 5 million yuan.
The reward for equity investment enterprises, venture capital enterprises and their management companies will — under certain conditions —be equivalent to 5% of the investment income they generated when they exited their investment projects in the previous year. To qualify for the reward, their operating income (including investment income) for the last complete fiscal year must have surpassed 200 million yuan, and increased by at least 10% year-on-year. Alternatively, they must have seen their total profit reach at least 200 million yuan. The maximum reward for such enterprises shall not exceed 20 million yuan.
Enterprises managing venture capital funds that invest in Shenzhen’s seed-stage and start-up tech enterprises for more than two years will be rewarded with 10% of the actual investment amount. The maximum reward for each enterprise they invest in is 1 million yuan, and the cumulative reward will not exceed 5 million yuan.
How to apply:
Log in to the website of Guangdong government services (www.gdzwfw.gov.cn), select “Shenzhen Municipal Local Financial Regulatory Bureau (深圳市地方金融监督管理局),” then register and fill in the relevant information. Next, submit scanned copies of the application materials in accordance with the “Operation Guidelines for Declaration of Project to be Subsidized,” and deliver the paper materials to the Civic Center Administrative Service Hall after successfully passing the review.
Inquiry Hotline: 0755-88120714 Shenzhen Municipal Local Financial Regulatory Bureau
2. To orderly pilot a QFLP
Qualified Foreign Limited Partnership (QFLP) refers to an enterprise that is invested and established by foreign enterprises or individuals, raises funds from foreign investors in a non-public manner, and invests in Chinese non-publicly traded corporate equity.
After Shanghai took the lead in piloting the QFLP program in 2011, Shenzhen successively issued documents such as the “Interim Measures for Launching the Pilot Program of Qualified Foreign Limited Partnership in Shenzhen” and the “Measures of Shenzhen City for the Pilot Program of Foreign-invested Equity Investment Enterprises” in 2012 and 2017 to officially launch its QFLP pilot scheme. As of the end of 2021, Shenzhen had attracted foreign-funded enterprises to set up 171 QFLP management companies, and launched 53 QFLP funds with a fund size of US$7.55 billion, attracting a number of internationally influential equity investment institutions to gather in the city.
In order to further promote the next round of high-level opening up for the city's financial industry, expand the inflow of foreign capital, improve the quality of how foreign capital is used, and promote and guide the standardized and orderly development of the QFLP in Shenzhen, the Shenzhen Municipal Local Financial Regulatory Bureau has revised and improved the “Measures of Shenzhen City for the Pilot Program of Foreign-invested Equity Investment Enterprises.”
Scope of pilot operations:
QFLPs are allowed to carry out the following businesses in China according to the law:
(1) Investing in the equity of non-listed companies;
(2) Investing in non-publicly issued and traded ordinary shares of listed companies, including the private placement of new shares, block trades, transfer agreements, and so forth;
(3) Participating in the allotment of shares as an original shareholder of a listed company;
(4) Providing management consulting for the enterprises they have invested in;
(5) Other businesses permitted by the China Securities Regulatory Commission or the Asset Management Association of China.
How to apply:
Go through the registration procedures for private equity fund managers and filing procedures for private equity funds at the Asset Management Association of China in accordance with the “Interim Measures for the Supervision and Administration of Privately Offered Investment Funds” and the “Measures for the Registration of Management Institutions of Privately Offered Investment Funds and the Recordation of Funds (for Trial Implementation)” and other relevant provisions. The Shenzhen Municipal Local Financial Regulatory Bureau, together with relevant departments and units, shall regularly publicize the registration of private equity fund managers and the filing of private equity funds by enterprises attending the pilot program.
3. Promoting supply chain finance to serve the real economy
The development of supply chain finance is an important measure for advancing supply-side structural reforms and enhancing the ability of finance to serve the real economy. In addition to a large number of financial institutions actively developing supply chain financing, Shenzhen is also home to the headquarters of more than 80% of supply chain management companies in the country, as well as a large number and various types of supply chain entities.
In order to steadily promote the reform and innovation of Shenzhen's supply chain financing, and effectively prevent financial risks in the supply chain, the Shenzhen Municipal Local Financial Regulatory Bureau drafted the “Opinions on Promoting the Development of Supply Chain Financing in Shenzhen.” This has helped solve the financing difficulties of many small and medium-sized enterprises while also resolving the difficulties encountered in obtaining loans by real economy entities.
Main policy terms:
For financial institutions, core manufacturing enterprises, and supporting service institutions of supply chain finance that have settled in the demonstration zones or industrial parks of Shenzhen, each district can provide policy support based on its overall contributions.
Financial institutions are encouraged to rely on core enterprises in the supply chain to jointly develop personalized and characteristic supply chain financial products and services through financing recommendations, transaction information sharing, confirmation of payment receipts and payments (or confirmation of creditor's rights and debt relationships), assistance in the realization of inventories, and strengthening supply chain management.
Districtscan provide policy support to service institutions working in supply chainfinance according to their business scale, number of customers, tax contributions and industrial linkage effects.
Credit risk-sharing mechanisms such as government financing guarantee funds and small, medium and micro-sized enterprise loan risk compensation mechanisms can be used to support financial institutions increase credit extensions to upstream and downstream small, medium and micro-sized enterprises of core manufacturing enterprises.
Based on the premise of real trade and the solid regulation of assets, the sources of supply chain finance funds can be expanded through interbank lending, rediscounting, lease factoring, Pre-ABS, asset management plans, private equity funds, and other means.
4. Strengthening the cultivation of financial talents
To maintain and strengthen the international standing of Shenzhen's financial industry, the Shenzhen Municipal People’s Government issued the “Implementation Measures for Supporting the Development of Financial Talents in Shenzhen” in 2020 to speed up the construction of a high-quality, innovative and international professional financial talent team. The measures also give full play to financial talents’ role in terms of providing intellectual support to financial reform and development.
As of December 2022, the Shenzhen Municipal Local Financial Regulatory Bureau has held three training courses for leading financial talents and one training course for key financial talents, involving 880 talented personnel from the industry. The bureau has also hosted 14 financial lectures for young talents, attracting more than 1.5 million people to study online. Over a period of three years, 7.53 million yuan of subsidies have been issued to financial practitioners to help them improve their professional skills.
Main policy terms and conditions:
I. Implement a training program for talents in the finance industry
1. Leading talent training plan. Based on the recommendations of financial institutions, financial regulatory agencies in Shenzhen and relevant departments of the municipal government, 100 promising high-end financial talents are selected every year. They are then provided with training programs and can receive up to 50,000 yuan each per year in training funding.
2. Key talent training plan. Based on the recommendations of financial institutions, financial regulatory agencies in Shenzhen and relevant departments of the municipal government, 1,000 key financial talents are selected every year. They are given special training resources and can receive up to 10,000 yuan each per year in training funding.
3. Youth talent support program. The Pengcheng Financial Lecture provides 10,000 young financial talents with online and offline training resources every year.
II. Providing internship subsidies for financial talents. An internship subsidy project for college students provides interns who have been working for more than six weeks with one-time internship subsidies. Undergraduate, master and doctoral students can receive 2,000 yuan, 3,000 yuan and 5,000 yuan per person, respectively.
III. Encouraging financial practitioners to improve their professional skills. Supporting financial practitioners to sit CFA, FRM, ASA, FCAA and ACCA exams. Those who have obtained certificates after Jan. 1, 2017, and who have worked full-time in Shenzhen’s financial industry for at least two years, will receive subsidies of 10,000 yuan for each qualification certificate they obtain. The subsidy is capped at 50,000 yuan per person.
How to apply:
The Shenzhen Municipal Local Financial Regulatory Bureau will publish the application guidelines on its official website in due course, and will deal with the applications at a specified time. For the qualifications, materials, and channels required for application, please refer to the relevant guidelines.
More information is available on the website of the Shenzhen Municipal Local Financial Regulatory Bureau (深圳市地方金融监督管理局).
5. Financial service platform makes financing for small, medium and micro-sized enterprises faster and more efficient
The Shenzhen Entrepreneurship and Innovation Financial Service Platform (Shenzhen financial service platform) was initiated at the end of 2016 and officially went online in August 2017. Based on guiding financial resources from the supply side to support the development of the real economy, the platform provides companies with one-stop services such as debt and equity financing, credit inquiries, credit ratings, financing guarantees, industry consulting, investment and financing policy supportto help enterprises resolve the difficulty, high expense and complexity of financing.
The Shenzhen financial service platform mainly realizes four types of integration. The first is data information integration. This integrates business-related data such as that related to industry and commerce, taxation, social security, utilities, and information on government incentives, subsidies, and penalties. The aim of this is to establish a rating system and a risk profile from multiple angles such as operational, repayment, and innovation and growth capabilities.
The second is financial resources integration. This brings together various entities such as banks, securities, insurance, financing guarantee, angel investment, venture capital, and asset and credit evaluation firms to provide a diverse range of financing services for enterprises at different growth stages.
The third type covers the integration of preferential policies for enterprises. It implements various preferential policies such as credit loan risk compensation, financing guarantee funds, and small loan guarantee insurance to encourage cooperation between the government, banks, insurance companies, guarantors and enterprises.
The fourth is corporate services integration. Relying on the intelligent matching function of the platform, the application materials and review process are simplified by classification, and efforts are made to facilitate the financing of small, medium and micro-sized enterprises through one-stop services.
As of Dec. 19, 2022, 170 financial institutions had registered with the Shenzhen financial service platform, covering all commercial banks in Shenzhen, while 324 financial products had been launched on the platform. It has served 241,600 enterprises, handled 370,000 corporate demands, and handed out 1.75 trillion yuan in financing and lending for private small, medium and micro-sized enterprises (including 421.84 billion yuan in pure online lending). The overall level of satisfaction recorded by enterprises stands at 96%.
During the COVID-19 pandemic from 2020 to 2022, the Shenzhen financial service platform launched more than 300 livestreaming activities in cooperation with the municipal, district and subdistrict authorities, benefiting 180,000 Shenzhen enterprises. At the same time, the platform has also cooperated with relevant departments and institutions to set up nine special sections of cooperation, such as the “First Loan in Yantian,” the “GBA Policy Special” and “Appeal Direct Delivery.”
The official WeChat account of the Shenzhen financial service platform
Official website of the Shenzhen financial service platform: www.o-banks.cn
Tel: 0755-23984329 ( 9:00-18:00, Monday to Friday)