Hangzhou accelerates the implementation of AIC equity investment pilot and strengthens the development of patient capital empowerment
On October 8, Hangzhou launched an initiative aimed at promoting the establishment of financial asset investment companies (AICs) as part of a pilot project for equity investment. In a significant event, five major banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications—signed collaboration agreements with state-owned enterprises in Hangzhou, with the goal of mobilizing a fund size of 90 billion yuan. This positions Hangzhou as the first city in China to achieve comprehensive cooperation with all five major AICs.
Just weeks earlier, on September 24, the National Financial Regulatory Administration announced that the equity investment pilot program for AICs would expand from Shanghai to 18 cities, including Hangzhou as one of the new pilot locations. This announcement prompted Hangzhou to initiate related pilot activities swiftly, enhancing cooperation efforts and making notable progress in technology-driven financial development.
The broader pilot program for AIC equity investment is seen as a significant initiative to increase patient capital while exploring innovative financial methods to support the growth of advanced productive forces. As a front-runner in the digital economy, Hangzhou leverages technological innovation as a key driver of economic growth, fostering a dynamic ecosystem for tech advancement.
The five major banks are set to utilize this pilot program and their strategic agreements to strengthen the connection between equity lending and guarantees across key industries in Hangzhou. Their objective is to offer full-chain, life-cycle services to technology enterprises, facilitating technological innovation and industrial upgrades while bolstering high-level self-sufficiency in technology.
Yao Gaoyuan, Deputy Secretary of the Hangzhou Municipal Committee and Mayor, highlighted that AICs, as part of the “national team” of patient capital, will not only elevate the development of Hangzhou’s financial sector but also provide varied direct financing options for local tech companies. This will accelerate the creation of innovation capital in Hangzhou and support the transfer and conversion of technological achievements, thereby optimizing and upgrading the industrial structure.
Wei Zheng, Vice President of the Industrial and Commercial Bank of China’s Zhejiang Branch and President of its Hangzhou Branch, emphasized a key change brought about by the pilot expansion. Previously, AICs could only make equity investments through debt-to-equity swaps, which restricted their investment purposes. With the new initiative, they can now fully leverage their expertise in venture and equity investments, enhancing support for technological innovations and broadening funding sources for businesses.
The new pilot program boasts a broader investment scope and more flexible mechanisms. Compared to previous initiatives, the revised policy eases restrictions on the amount and percentage of equity investments, increasing the on-book investment limit from 4% to 10%, and raising the cap on investments in a single private equity fund from 20% to 30%. These policy enhancements open up expansive opportunities for AICs to engage in equity investments on a larger scale.
Industry experts believe that the gradual implementation of AIC equity investment pilot policies will expedite the flow of bank-related funds into the equity investment market, encouraging more long-term capital to invest in technological innovations. This not only helps banks develop diversified investment channels but also nurtures the growth of patient capital within the tech investment sector.
Currently, Hangzhou is at a pivotal stage in enhancing its urban capabilities, working toward becoming a comprehensive national science center and a preferred hub for the transfer and transformation of scientific achievements. The integration of digital and physical economies is boosting the efficiency of five major industrial ecosystems: smart IoT, biomedicine, high-end equipment, new materials, and green energy. Thus, there is an urgent need for more robust, broader, and accessible financial support.
In recent years, Hangzhou has been refining its approach to financial development, aspiring to build an “internationally influential financial powerhouse.” Coordinated efforts are underway to strengthen financial regulation, mitigate financial risks, enhance financial services, and deepen financial reforms. As of the end of August this year, the city reported a balance of deposits and loans reaching 77.402 billion yuan and 71.612 billion yuan, respectively, and has successfully nurtured a total of 307 publicly listed companies.
