The Chinese government has created a fund worth 100 billion yuan focusing on key technology sectors to boost Shanghai’s local economy.
Shanghai represents the economic and financial heart of mainland China. Always a glittering showcase of the economic reforms launched by the Chinese Communist Party over the years, it is the most populous city in the country (around 25 million inhabitants) and with the highest GDP (4.72 trillion yuan in 2023). The COVID-19 pandemic and recent international geopolitical tensions have, however, affected its image, compromising, at least in part, its virtuous mechanisms.
The city has failed to reach its growth target for 2023 due to poor exports, with a GDP still expanding by 5%. However, the growth rate was lower than the target of 5.5%. It is for this reason that Beijing intends to relaunch the megalopolis, or rather give new impetus to its local economy. How? Creating a fund worth 100 billion yuan (13.8 billion dollars) focused on key technology sectors.
The aforementioned fund will support the most promising start-ups in the sectors of artificial intelligence, biotechnologies and semiconductors, and, in the intentions of the municipal government, should attract Shanghai a greater number of hi-tech companies.
The local state-owned assets regulator, the South China Morning Post explained, will be responsible for the creation and operations of this particular financial instrument. Recall that funds of funds - created in the United States in the 1960s, with pension funds as the main source of capital - are multi-manager investments that allow broad diversification and adequate asset allocation with investment expertise in different fund categories.
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The importance of Shanghai
Last November, Chinese leader Xi Jinping visited Shanghai for the first time in three years, hinting that the government was stepping up efforts to support the country’s economy and financial markets. For the record, Xi had visited the Shanghai Futures Exchange, a technology exhibition in Zhangjiang High-Tech Park, and an executive-subsidized rental housing community.
“General Secretary Xi Jinping’s visit to Shanghai sends important signals at a critical moment,” wrote Xinhua in an editorial. “Finance should better serve the real economy,” the Chinese news agency added, explaining that Xi’s inspection of the recalled Shanghai Futures Exchange would show his “high priority and ardent expectations” towards the transformation of the giant Asian into a financial powerhouse. “Shanghai must be a vanguard in the country’s reform and opening-up and a pioneer in innovation and technological development,” Xi said.
The fund of funds, returning to the main theme, is in short functional to the PCC project, and it is no coincidence that it has been talked about since the summer of 2023. Zhu Zhisong, secretary of the Communist Party of Pudong, home to Shanghai’s Pudong New Area, had said the 1,200-square-kilometer district on the eastern bank of the Huangpu River would promote the growth of hi-tech companies to support the local economy. Media reports predicted capital inflows worth tens of billions of yuan into local technology companies following the creation of government funds.
China’s Plan
The mayor of Shanghai, Gong Zheng, used clear words at a recent conference on promoting investment in the megalopolis: “When you invest in Shanghai you are planting a seed for a prosperous future. Shanghai plans to build several world-class industrial clusters.” Shanghai attracted $24 billion in foreign funds last year, surpassing the previous record of $23.96 billion set in 2022.
In any case, the Pudong municipal government launched three funds of funds, one in February and two in June; the former has assets under management of 7.1 billion yuan, while the latter two have 4 billion yuan each. In short, Shanghai is ready to warm up its engines.
Meanwhile, medical device maker Boston Scientific, vaccine developer Moderna and electric vehicle giant Tesla have agreed to establish new manufacturing facilities in Shanghai as part of their plans to expand into the world’s second-largest economy. Apple has just opened a maxi Apple store in the city. Confirming how China continues to exert a certain attraction towards large foreign companies.
Original article published on Money.it Italy 2024-04-19 06:45:00. Original title: Un fondo da 15 miliardi per rilanciare il settore tech: così la Cina punta su Shanghai
