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China’s Government is the World’s Biggest Private Equity Investor

Alipay, a service by Ant Financial
Alipay, a service by Ant Financial

中国政府——全世界最大的私募股权投资方 China’s institutional funds and government enterprises are leading recent investment rounds with multibillion investments. With a staggering $339 billion stake put on venture capital, the Chinese government may be the biggest VC investor in the world. On April 26, Ant Financial (a subsidiary of Alibaba Group Holding Ltd) has completed its Series B funding with a $4.5 billion investment. Valuated at $60 billion, Ant Financial initially aimed to raise $3.5 billion, and the final increased funding was achieved due to participation of China Investment Corp Capital and CCB Trust – both are state-backed funds.

The Chinese government’s support of entrepreneurship and venture is rather new. During the last two decades, Chinese start-up companies were seeking funding overseas (as was the case with Alibaba and Baidu, Inc.), and numerous Chinese companies preferred to be listed on NASDAQ rather than SSE. Now, suggests a Bloomberg report, these companies buyout their public shares and return to China, where they can enjoy increased valuations and generous state-backed investments.

After years of relying on traditional and heavy manufacturing, the Chinese economy experienced a relative slowdown in the early 2010’s, following which the Chinese government increased support of entrepreneurship in late 2014. This, in turn, led to the establishment of no less than 1,500 startup accelerators throughout China, and now it seems that the Chinese state-funded financial institutions are heavily investing in venture capital, hoping to enjoy the rapid value increases of start-up companies.

The rapid pace in which the Chinese start-up scene has developed within only a few years is a great example of a government policy favoring innovation and nurturing the venture ecosystem. In fact, the Chinese government is implementing some of the items outlined in The Public Venture Policy Menu by Robyn Klingler-Vidra, CIV Senior Research Fellow. Robyn’s original article was published in the Policy issue of Coller Venture Review.

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