Shenzhen, China’s Silicon Valley, unveils 20-point plan to boost funding for local tech companies amid US investment restrictions

Shenzhen’s municipal government plans to start trials of ‘equity + debt’ financing via approved banks in the Hetao and Qianhai cooperation zones
The trials will involve the city’s medium and large banks, along with their Hong Kong investment arms, providing financing services to tech firms

Shenzhen

Iris Dengin Shenzhen

Published: 7:07pm, 9 Oct 2023

Why you can trust SCMP

Shenzhen, China’s Silicon Valley and the richest city in southern Guangdong province, has unveiled a new initiative to help local technology companies with funding, including forging closer ties with neighbouring financial centre Hong Kong, amid targeted restrictions on US venture capital and private equity stakes in Chinese firms.

The city’s municipal government aims to develop an “innovative capital centre” and a “world-class exchange” in the southern metropolis, according to a 20-point plan issued on Sunday by the Shenzhen Financial Regulatory Administration and four other agencies.

“We are clearly aware that the financial development and support for science and technology innovation still face some pain points and difficulties that need to be resolved,” the Shenzhen municipal government said in a separate document. “As technology advances, the financial service system that is compatible with it must continue to be upgraded.”

Without providing details, the municipal government plans to start trials of “equity + debt” financing via approved banks in the Hetao Cooperation Zone and the Qianhai Cooperation Zone, which are tech- and finance-focused industrial clusters jointly established under partnerships forged between Shenzhen and Hong Kong.

01:56

Biden to introduce new restrictions on US investments in China, declares tech ‘emergency’

The trials will enable Shenzhen’s medium-sized and large banking institutions, along with their Hong Kong investment arms, providing financing services to tech companies in the metropolis.

The Shenzhen municipal government’s funding initiative marks the latest effort by the city, which Chinese President Xi Jinping has described as an economic model for the country, to help the domestic tech sector overcome stifling US sanctions.

The Biden administration in August announced a new executive order that restricted US venture capital and private equity investments in Chinese companies involved in three areas: semiconductors, quantum computing and artificial intelligence systems.

In September, Shenzhen revealed a three-year action plan to boost imports of semiconductors and various hi-tech equipment. That came months after the city’s municipal government announced a major infrastructure development plan that would add 10,000 5G base stations this year, as part of a plan to bolster internet connectivity and digital economic activity in the metropolis.

Shenzhen to import more integrated circuits, steel itself against US sanctions

Under its tech funding plan, the Shenzhen municipal government will direct venture capital (VC) firms to make investments in so-called strategic industries, including telecommunications and semiconductors.

The city will also step up financial support for basic research and core technology projects, while expanding the scale of bond issuance by eligible companies and encouraging insurance firms to launch plans specifically for tech firms.

Under its 20-point plan, Shenzhen will also make credit-reference data accessible to the financial industry and explore an exchange mechanism of credit information between the city and Hong Kong.

Shenzhen, the original test bed for China’s reform and market-opening initiatives, is home to many major domestic tech companies, including video gaming giant Tencent Holdings and global telecoms equipment market leader Huawei Technologies. In 2020, the city was picked by Beijing to conduct pilot reforms in various industries, with the tech sector a key target.

Funding for VC firms that invest in China evaporated rapidly in the second quarter, as investors grew increasingly hesitant about betting on a country struggling with overhanging economic woes and geopolitical tensions with the US. China-focused VC funds raised US$2.7 billion from April to June, down 54.2 per cent from the previous quarter, according to a report in August by research firm Preqin.

Post