- Officials move to strengthen capital exit channels as province deepens tech investment strategy
- Policy push aims to complete venture capital exit channels and support long-term tech investment
Zhejiang will accelerate the development of merger-and-acquisition funds and secondary private-equity funds as part of efforts to build a “patient capital” ecosystem supporting technology innovation, a top provincial official said.
Deputy Party Secretary and Governor Liu Jie made the remarks during visits to Zhejiang Innovation Investment Group and Hangzhou Iron & Steel Group on April 1, calling for the province to explore investment models with distinctive local characteristics.
His comments align with heated discussions among policymakers and investors about nurturing long-term capital capable of accompanying tech companies through extended growth cycles.
They also represent a policy shift toward strengthening investment exit mechanisms alongside early-stage financing.
Solution to bottlenecks
Second funds, or S-funds, operate through acquisition of existing private-equity stakes to provide early liquidity for investors.
For its part, M&A or buyout funds, which drive industrial consolidation through equity acquisitions of mature firms, are increasingly viewed as critical components of the venture-capital lifecycle.
Together, they are seen as a solution to bottlenecks often encountered at the management and exit stages in China’s tech innovation financing system.
Liu urged state-backed investment platforms to maintain market-oriented operations while focusing on “early-stage, small-scale, long-term and deep-tech” investments, positioning them as bridges linking government resources, industry players and private capital.
He also called for closer tracking of frontier technologies to identify disruptive innovations at their source and support forward-looking research that can strengthen the province’s pipeline of technology companies.
National hub for ‘patient capital’
The policy direction builds on remarks Liu delivered a week earlier at Zhejiang’s high-quality venture capital development conference, where he pledged to turn the province into a national hub for patient capital by creating a full life-cycle technology finance system enabling investors to enter, invest, manage and exit more efficiently.
Concrete steps are already underway. In January, Zhejiang completed registration of a 10.103 billion-yuan ($1.47 billion) science-and-technology M&A fund of fund (FoF) backed by a consortium led by the provincial social security capital.
It targets sectors such as next-generation information technology, high-end equipment and new energy sectors.
Zhejiang has also emerged as an early mover in China’s nascent S-fund market. In January this year, Wenzhou completed the country’s first on-platform transfer of a state-owned S-fund stake, providing a standardized model for secondary transactions.
In March, Jinhua launched a 1 billion-yuan FoF incorporating S-fund functions — reportedly the first of its kind within Zhejiang — linking into the province’s broader government-led secondary market strategy.
Meanwhile, regulatory support is expanding in parallel. Six provincial authorities — including the Zhejiang Financial Regulatory Administration, the local bureau of the China Securities Regulatory Commission and the provincial finance department — recently issued guidance promoting pilot equity-transfer platforms in Hangzhou and Ningbo.
The framework allows state-owned fund stakes to be transferred through market-based pricing mechanisms, with transaction prices recognized for tax purposes, laying institutional groundwork for a more liquid private-equity secondary market.
