bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

China should loosen equity-investment constraints on insurance companies and pension funds to promote development of its nascent venture-capital industry, members of an international advisory team have told the Guangdong government.

Beijing allowed insurers to buy mutual funds from October last year as an indirect way of investing in stocks and set a limit of 5 per cent. The limit is relaxed to 10 per cent for some companies.

The advisers also recommended a merger of China's A-share and B-share markets, now restricted to domestic and foreign investors respectively.

'Insurance companies and pension funds have the skills and knowledge necessary to evaluate long-term investment risks,' said Richard Robertson, senior vice-president for the US-based Lincoln Financial Group.

The suggestion to merge China's A- and B-share markets to create a more liquid market on which venture capitalists could float their investments was made by Cesar Zalamea, president and managing director of the American International Group (Asia).

Mr Robertson and Mr Zalamea were speaking yesterday at a seminar on venture-capital investment held in conjunction with the Guangdong government's second annual International Consultative Conference.

The seminar was chaired by Guangdong executive vice-governor Wang Qishan, whose portfolio includes the clean-up of the province's troubled financial sector.

But while the seminar drew a packed audience - Mr Wang noted that 'this topic is very fashionable' - it also underscored how rudimentary Guangdong's venture-capital industry remains.

In his opening address, Li Zhongfeng, vice-director of the Guangdong Science and Technology Bureau, noted that Guangdong was home to just 13 venture-capital companies with total capital of only 4.8 billion yuan (about HK$4.49 billion).

The provincial and municipal governments had put up 2.7 billion yuan, or 56 per cent, of this amount.

Foreign investors had contributed only 100 million yuan. Foreign investors accounted for only 2.1 per cent of Guangdong's accumulated venture capital.

By comparison, said Alexander Kan, a member of the ING Group's executive board, venture-capital financing had existed in the United States for more than 30 years.

And over the past 20 years an estimated 20,000 European growth companies had raised more than 60 billion ECUs in long-term capital.

While government involvement in the industry's initial stages was necessary, its direct role would inevitably fade, Mr Kan said.

He recommended that the Guangdong government get the ball rolling by adopting two European initiatives, namely a guarantee system in the Netherlands under which the Dutch government made good on 50 per cent of investors' losses, and an initiative in Germany whereby the government matched venture-capital investments.

Mr Li cited a number of obstacles to development of the industry, such as the lack of exit routes for venture capitalists and restrictions on foreign investors.

'It is not easy for venture investment organisations to withdraw their capital through listing on the stock market, stock transfers or mergers,' he said.

'Restrictions on investments by insurance companies, commercial banks and pension funds should be relaxed, and their moderate involvement in venture [capital] investment should be permitted.'

Mr Li also said compensation systems for fund managers were inadequate.

'Insurance companies and pension funds have the skills'



Key funding role seen for pension cash, insurers