Funds get Li push toward tech sector

Premier Li Qiang has signed a State Council decree introducing a regulation on the supervision and administration of private investment funds, according to Xinhua News Agency.

The regulation seeks to promote the standardization in the industry and sound growth, safeguard the legal rights and interests of investors, and encourage the sector to contribute more to the real economy and foster scientific and technological innovation.

It also provides clarity on its applicability, defines the obligations and requirements of private fund managers and custodians, establishes regulations for fund-raising and investment activities, including specific provisions for venture capital funds, and strengthens supervision, management and legal accountability.

According to a statement from the State Council, the regulation, comprising seven chapters and 62 items, is set to become effective from September 1.

China Securities Regulatory Commission welcomed the move, saying the regulation is conducive to further improving the regulatory system for private funds and promoting healthy development in the private equity industry.

The regulation clearly states the industry will be encouraged to serve the real economy, promote technological innovation and improve the development environment.

It also lays out the legal grounds for venture capital funds, implements differentiated supervision and self-discipline management, and promotes early-stage, small-scale, and technology-focused investments.

CSRC said the regulation provides policy support for funds such as funds of funds, venture capital funds, and government funds that have reasonable expansion needs.

Additionally, the regulation has a dedicated chapter for the classification supervision of venture capital funds.

It clearly outlines the conditions that venture capital funds should meet in terms of investment scope, investment duration and contract strategies.

The regulation implements supervision for venture capital funds in areas such as registration and filing, fund-raising, investment operations, risk monitoring and on-site inspections.

It also facilitates venture capital funds that are primarily engaged in long-term investments, value investing and significant technology transfer in aspects like investment exits.

The regulation also focuses on enhancing risk control. Measures such as on-site inspections, investigations, audits, and potential takeovers may be implemented to address illegal or non-compliant behavior by fund managers.