China’s Tianjin city has established a government guidance fund with a target of raising RMB100 billion (US$14.5 billion) to encourage investments in advanced industries including high-end manufacturing and aerospace in the city 137 kilometers southeast of capital Beijing.
Tianjin’s announcement marks the latest in a flood of new government guidance funds that hit a high point last year. A total of 901 government guidance funds were established in 2016, with an aggregate fundraising target of RMB2.4 trillion (US$347 billion). The figures are higher than the combined numbers of such funds formed during the three years between 2013 to 2015, both in terms of the number of new funds and their fundraising targets, according to data from ChinaVenture.
Many Chinese local governments have turned to government guidance funds as another form of financing after Beijing tightened controls on local government debt.
The Tianjin Haihe Industry Fund will be seeded with RMB20 billion (US$2.9 billion) from the city’s fiscal budget, and seeks to raise an additional RMB100 billion (US$14.5 billion) in private capital. The fund will then establish subsidiary funds for various target sectors and raise additional private capital, with the ultimate aim of being able to deploy RMB500 billion (US$72.4 billion).
The fund has secured shareholders including CITIC Trust, China Minsheng Investment Group, Tsinghua Unigroup, Haier Group, China Oceanwide Holdings Group. Two Chinese private equity firms, Hony Capital and ChinaEquity Group, are named as its shareholders as well.
Significantly, Tianjin city government has also signed agreements with a number of banks for over RMB100 billion in capital support, including China Construction Bank, Bank of China, Industrial and Commercial Bank of China. It’s unclear what type of capital support the banks are to provide to the fund.
The Tianjin Haihe Industry Fund will support a range of industries including high-end manufacturing, information technology, aerospace, new energy, new energy automobile, new materials, bio-pharmaceuticals and Internet-related sectors.
The fund will put special focus on marine engineering equipment, special high-voltage power transmission, high-end CNC machine tools, robots, integrated circuitry, high-performance servers and domestic database.
"The most important point about government guidance funds is that its pursuit must be integrated with those of the market," Wang Jinhong, chairman of the fund management company tasked with managing the Tianjin Haihe Industry Fund, told Chinese media. "Some government guidance funds that cannot deploy their capital because their pursuits do not meet those of the market. My biggest ambition is to realize government’s targets via market operations."
The Tianjin Haihe Industry Fund will give priority to projects and companies based in Tianjin, but will not limit its scope in Tianjin only.