China Considers Banning Venture Funds From Investing In A-Share Companies

The Chinese government is considering new policies that could ban venture funds from investing in A-share listed companies, according to Chinese media reports citing a speech made by a senior securities regulator.

Venture funds will be prohibited from investing in A-share listed companies, a field reserved for private equity investment entities, according to Liu Jianjun, the associate director of the Private Equity Funds Supervision Department at the China Securities Regulatory Commission (CSRC).

Some venture firms have raised money via opaque channels to speculate in the stock market, a key concern behind the new policy consideration.

Funds that have invested in A-share companies will be required to sell their holdings. Otherwise, they will not be able to enjoy government support for entrepreneurship and innovation, such as subsidies, tax and other benefits.

Venture investors will be allowed to back companies listed on the New Third Board, however, offering a boost to the board designed to support small and medium technology firms.

In the U.S., around 70% of venture capital were spent for large equity investment deals and other transactions, instead of backing start-ups, during the 1990s, Liu said.

Similarly, China’s venture funds should return to its origin of backing innovative technology start-ups, he added.

 

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