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Problems and Countermeasures in the Development of Government Investment Funds

Author: Wang Xudong Zhang Xianwang Source: China Financial and Economic News Published: 2019-12-25

In recent years, China's government investment funds have gradually grown from scratch, showing a rapid development trend, from the state to the provincial, city and gradually extended to the district and county levels. According to preliminary statistics, as of the first half of this year, a total of 2,088 government guidance funds have been established nationwide, with a subscription scale of 11.6 trillion yuan. The government investment fund has improved the use of financial funds, increased the efficiency of the use of financial funds, increased the financing channels for enterprises, and achieved a win-win situation for both the government and the market. It played a positive role and injected vitality into economic development. 运作管理中还存在 一些 困难和问题 ,亟需理顺,才能更好地发挥作用。 However, because government investment funds are new and affected by the tightening of national financial regulatory policies, there are still some difficulties and problems in operation and management. They need to be rationalized to play a better role.

I. Tighter financial supervision policies have made fund raising difficult. Since the second half of 2017, the Ministry of Finance, the People's Bank of China, and the China Banking Regulatory Commission have successively introduced a series of policies and measures. Financial deleveraging has continued to increase, and market liquidity has gradually tightened. Especially in April 2018, the People ’s Bank of China and other four ministries and commissions issued the “Guiding Opinions on Regulating the Asset Management Business of Financial Institutions” (collectively referred to as “the new rules for asset management”). While preventing debt risks, financial institutions ’investment in government investment funds has been affected. Very large restrictions have caused banks to stagnate funding at the fund level. Although in October this year, the National Development and Reform Commission and other six departments issued the "Notice on Further Clarifying the Regulation of Financial Institutions' Asset Management Products, Investment and Venture Capital Funds and Government Assets Industry Investment Funds," but it is also limited to financial institutions that can continue to provide new rules for capital management. The subscription agreement signed with the government investment fund before the introduction. At the same time, affected by changes in the macroeconomic environment, the growth of private investment has slowed, and the ability of social capital to fund government investment funds has declined, which has also affected government investment fundraising.

Second, the low degree of marketization restricts the effectiveness of the fund. At present, the government investment funds in China are basically operated and managed according to the "government guidance and market operation" method, but the marketization of some local government investment funds is not high, which restricts the effectiveness of government investment funds. The purpose of setting up a government investment fund through fiscal investment is to leverage financial and social capital and guide the adjustment of the local industrial structure and economic development mode. However, some places have adopted administrative methods to manage government investment funds by referring to the management of special funds. The scale, some also limited the specific regions, specific industries and specific stages of investment, and some even raised the need to deviate from market-oriented goals such as the financial investment cannot lose money, and the value-added and preservation of state-owned capital. The investment operation and effectiveness of the government investment fund were brought into play.

Third, it is difficult to form a fist effect if the upper and lower are not tightly combined. It is understood that at present, 18 government investment funds have been established by relevant state ministries and commissions, with a subscription scale of nearly 2 trillion yuan; more than 2,000 government investment funds have been established at the provincial, city, county (district) level, with a scale of nearly 100,000. 100 million yuan. However, the fund investment projects are basically at the grassroots level. At present, the government investment funds of the state, province, city, and county (district) are basically fighting each other. There is a lack of cooperation between them. There are still relatively few government investment funds established by mutual investment. It is not possible to mobilize the enthusiasm of the grassroots, and it is not easy to form a fund synergy, and it is difficult to give full play to the fist effect.

Fourth, the lack of professional talents affects the efficiency of fund management. Compared with market-oriented funds, government investment funds take into account both policy objectives and economic benefits. They must not only adhere to market-oriented operations, but also pay attention to the safety of financial funds, and have higher requirements for professional management of operations. With the establishment of government investment funds, competition for high-end fund professionals is fierce everywhere. However, the current shortage of professionals in fund management and financial investment is more prominent, especially domestic VC / PE institutions are mainly concentrated in financially developed regions such as Beijing, Shanghai, Guangzhou and Shenzhen, and other regions, especially the county level, have a poor entrepreneurial environment and high quality. With fewer projects, it is difficult to attract excellent fund management teams and high-end professionals, which has reduced the management capacity of government investment funds to varying degrees.

In view of the above-mentioned difficulties and problems of government investment funds, in order to better play the role of government investment funds, effectively promote financial and social investment to support the development of the real economy and achieve high-quality economic development, it is recommended to improve from the following four aspects:

The first is to relax restrictions on financial institutions' funding of government investment funds. The new rules on asset management are clear, and the relevant regulations on government investment funds for the asset industry are formulated separately. Recently, the National Development and Reform Commission and other six departments' notices have further clarified the funding of government investment funds by financial institutions, but they still limit the funding of government investment funds by financial institutions. It is recommended that relevant national ministries and commissions further relax the restrictions on financial institutions' participation in government investment funds, clarify the relevant policies of credit, insurance and other funds to participate in government investment funds, increase the effective financial supply by issuing corporate bonds, etc. The problem is to open up the channel of combining finance and capital contribution, broaden new ways for government investment funds to raise funds, and support the development of the real economy.

The second is to clarify the boundary between the government and market management, and improve the level of fund market operation. In July of this year, Shandong reformed the fund management system, sought a balance between market-oriented operations and policy objectives, cancelled government approval for the establishment of equity participation funds, changed the entrusted management to a registration system, and used provincial-level guidance funds as guidance fund management companies. The registered capital, determination of cooperation institutions, fund investment and other matters shall be decided by the company independently. Regarding the management of government investment funds, government departments should adhere to "managing the two ends and letting go of the middle" and the "front end", mainly to do well in policy design, formulate performance evaluation methods, and improve the institutional framework; ", To strengthen the performance evaluation of the entire process of the guidance fund, and honor the reward and punishment measures;" intermediate business "belongs to the market industry, and the guidance fund management company adopts a market-based approach to make independent decisions.

The third is to strengthen synergy and form a fund investment synergy. In order to speed up the investment of new and old kinetic energy conversion funds in Shandong, this year, Shandong has launched a "double-base" docking activity for fund entry into the grassroots. The province has organized 9 fund project promotion and docking activities in 9 cities including Weifang and Yantai. Kinetic energy conversion for major projects, the provincial guidance fund combined with the city and county guidance funds, and cooperation with social capital to tailor project funds, achieved good results. In order to give full play to the leading role of national-level funds, it is recommended to use mutual funding, strengthen project introduction, and jointly establish project funds to increase the synergy between funds established by national ministries and commissions and central enterprises and local government investment funds. Fund investments work together to support high-quality economic development.

The fourth is to do a good job in reserve and training of relevant personnel. It is recommended to include high-end fund talents in the high-level talent system, open a green channel for introducing fund professionals, adopt a market-oriented approach, face the domestic and foreign capital markets, and introduce a group of senior fund management talents and professional technical talents to enjoy settlement, housing, and spouses. Relocation, children's enrollment, medical treatment, social security and other policies. At the same time, it is suggested that relevant national departments should strengthen the training of government investment fund business in accordance with their responsibilities, improve the professional quality of employees, and promote the sustainable and healthy development of government investment funds. (Author Unit: Shandong Provincial Department of Finance)

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