The Chinese government has set up a special fund of 100 million
yuan (about US$12.8 million) to encourage venture capital companies
to invest in technology-based small and medium-sized enterprises
(SMEs).
Unlike past investment which has been directly injected into
technology-based SMEs, the fund, jointly offered by the Ministry of
Finance and Ministry of Science and Technology, will, for the first
time, target venture capital companies, venture capital management
enterprises and service agencies capable of investing in a
burgeoning number of technology-based SMEs.
According to provisional regulations on the management of the
fund, the government departments can use part of the fund to
purchase shares in venture capital companies that invest in such
SMEs or directly invest in SMEs together with venture capital.
The fund will also subsidize venture capital who invests in
those SMEs that are still in their pioneering stages to reduce
risks.
Technology-based SMEs refer to those whose business development
mainly hinges upon new technical innovations which are relatively
uncertain in terms of application and market prospects. As a
result, banks and venture capitals tend to be cautious when it
comes to invest in them.
A third-party institution will be entrusted to audit and
evaluate the performance of the fund, according to the
ministries.
Nearly three decades after China's economic reform and
opening-up, China has changed its economic growth policies from
emphasizing quantity to quality and mapped out a number of polices
to facilitate technical innovation.
The government has channeled a total of four billion yuan (about
US$512.8 million) so far from 1999 to technology-based enterprises.
In February, the Ministry of Finance and the State Administration
of Taxation have decided to grant a rebate to the taxable income of
venture capital investing in high-tech SMEs.
(Xinhua News Agency July 17, 2007)
