The Third Plenary Session of the 20th Central Committee of the Communist Party proposed to "encourage and regulate the development of angel investment, venture capital, and private equity, better leverage the role of government investment funds, and develop patient capital." It also emphasized "strengthening financial support for major national scientific tasks and small and medium-sized technology companies, and improving policies that support long-term capital investment in early-stage, small-scale, long-term, and hard-tech ventures." These initiatives not only provide clear policy guidance and support for the development of venture capital but also contribute to promoting innovation, optimizing market environments, expanding funding channels, and building a technology finance system, which has a profound impact on the healthy development of China's venture capital industry.
Recently, the Central Committee of the China Democratic League hosted the 2024 (24th) China Venture Capital Forum in Shanghai. The forum released the "Annual Report on the Development of China's Venture Capital," which showed that in 2023, the number and scale of China's venture capital funds grew, but the growth rate slowed down. By the end of 2023, the number of existing venture capital funds in China was approximately 32,400, a year-on-year increase of 15.62%; the scale of existing venture capital funds was about 7.75 trillion yuan, a year-on-year increase of 10.61%. At the same time, the average scale of individual funds and the scale of venture capital fund managers decreased.
The report indicates that last year, multiple regions established hundred-billion-yuan-level mother funds. In January 2023, Anhui proposed the establishment of a provincial emerging industry guidance fund with a total scale of no less than 200 billion yuan. Subsequently, Xi'an proposed to establish a key industrial chain fund group with a total scale of no less than 100 billion yuan, Zhejiang introduced the 3.0 version of the iterative industry fund, Guangzhou officially announced two mother funds with a scale of 200 billion yuan each, and Chongqing launched a 200 billion yuan mother fund... According to statistics from Zero2IPO Research Center, by 2023, China had established a total of 2,086 government guidance funds with a subscribed scale of about 7.13 trillion yuan; there were 104 market-oriented mother funds with a total management scale of 993.6 billion yuan.
In terms of investment direction, artificial intelligence large models have become a hot spot for investment. The report shows that in 2023, there were a total of 680 financing events in the national artificial intelligence field, with a total disclosed financing amount of 92.224 billion yuan. There were 202 cases where the single financing amount exceeded 100 million yuan, with a total financing amount of 87.436 billion yuan, accounting for 94.81% of the total annual financing scale.
Venture capital, as a financing method that effectively integrates innovative elements such as technology, capital, and talent with innovative enterprises, is a "catalyst" for promoting the transformation of scientific and technological innovation and an "accelerator" for innovative development. It is also an important carrier for the development of new quality productive forces. The Central Economic Work Conference clearly proposed to "encourage the development of venture capital and equity investment," indicating that the strategic position of venture capital in the high-quality development of China's economy is continuously improving. This has to some extent boosted the development confidence of the venture capital industry and injected a "strong heart agent" into the various operating entities of the industry facing significant pressure.
"In recent years, China's scientific and technological innovation and industrial development have been very rapid, but the overall efficiency of the innovation system is not high, and some key core technologies are still subject to others, while many investments in China are restricted." Tian Xuan, Dean of the National Finance Research Institute at Tsinghua University and Vice Dean of the Five Daokou School of Finance, believes that venture capitalists need to be more tolerant of entrepreneurs' personalities and create an atmosphere that tolerates failure when supporting entrepreneurial enterprises.
To achieve early investment, small investment, long-term investment, and hard-tech investment, patient capital is needed. A comparative study of 273 companies listed on the Shenzhen Small and Medium Board from 2004 to 2008 showed that companies supported by venture capital performed worse than companies not supported by venture capital 12 months after listing. "The reason is that after 12 months of listing, venture capital can cash out and leave, thus reflecting that the performance of companies with venture capital is worse." Tian Xuan said that venture capital should aspire to be patient capital, help enterprises and industries grow, and not just play a role in the final kick. "If corporate venture capital (CVC) shows more tolerance for trial and error, it will have a better effect on increasing the quantity and quality of innovation in invested companies. It is necessary to vigorously develop venture capital that tolerates errors and is inclusive."
Wu Xiaoqiu, former vice president of Renmin University of China and Dean of the National Finance Research Institute, believes that venture capital is an important source of vitality for the development of the capital market, and the development of the capital market provides an exit mechanism and effective incentives for venture capital. The two complement each other and form a virtuous cycle. "The China Securities Regulatory Commission is working hard to improve the institutional structure of China's capital market, but systemic changes take time. The ecological chain of China's capital market is undergoing significant changes. It is necessary to adhere to the attitude of reform, face difficulties and problems, and believe that the future of China's venture capital industry and China's capital market is promising." Wu Xiaoqiu said.