TLDR:
China’s technology sector heavily relies on capital from state-owned enterprises (SOEs) and government funds, creating a potential problem for the industry according to investment guru Fang Fenglei. Approximately 80% of investments in the tech sector in China last year came from government-backed funds and SOEs. This situation goes against existing Chinese law and could lead to significant issues.
Article Summary:
Mainland China’s technology sector has been significantly dependent on capital from state-owned enterprises (SOEs) and government-backed funds, with around 80% of investments in the tech sector last year coming from these sources. Investment guru Fang Fenglei, founder and chairman of Hopu Investment Management, expressed concerns about this reliance stating that it could potentially lead to a major problem in the industry. Despite some government guidance funds establishing patient funds focused on long-term growth, many are not effectively implementing this strategy.
Fang Fenglei highlighted that the current situation presents a sharp contradiction to China’s Partnership Enterprise Law, enacted in 2007, which prohibits SOEs from becoming general partners of private businesses. This contradiction could ultimately have negative implications for the industry. Fang’s remarks were made at Mergermarket’s AVCJ Private Equity Forum China event in Beijing, where he emphasized the need to address this issue in order to avoid potential challenges in China’s tech sector.
