China has officially initiated a significant drive to cultivate home-grown technological champions and enhance investment efficiency by launching a national venture capital fund alongside three substantial regional funds, collectively valued at billions of dollars. These new vehicles, namely the National Startup Investment Guidance Fund, and the three regional funds for the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Greater Bay Area, commenced operations on a recent Friday, as reported by Xinhua News Agency.

The national fund is substantially backed by 100 billion yuan from the Ministry of Finance, which secured these funds through the issuance of ultra-long special sovereign bonds, according to Guo Fangming, a Finance Ministry official. The three regional funds are structured through the national fund’s equity stakes in limited partnerships, and each is projected to eventually expand to over 50 billion yuan, as stated by Huo Fupeng, chairman of the state fund.

This strategic move comes amidst an intensified push by China for technological breakthroughs, particularly as competition with the United States escalates in critical sectors such as semiconductors. The government's decision also reflects a need for more disciplined investment approaches due to tighter fiscal conditions, including increasing debt risks and diminished revenue. The recent success of AI startup DeepSeek, which highlighted the efficacy of private capital, also provided a valuable reference point.

Bai Jingyu, an official at the National Development and Reform Commission (NDRC), emphasized that emerging and future industries currently face challenges such as limited investment and insufficient inputs of other innovation factors. He stated that addressing these gaps through the deployment of patient capital is the core purpose and mission of the guidance fund. Bai also affirmed that the state fund will operate based on market principles, with investment decisions made by professional managers.

The NDRC initially announced plans for this state fund in March, with an ambitious estimate that it could stimulate 1 trillion yuan of investment from local funds and private capital. The national fund is designed to operate for a 20-year period, with the first 10 years dedicated to investment activities and the subsequent 10 years to exits. This long-term horizon is intended to support sustained growth for companies and to cultivate 'little giants'—a term for smaller firms aligned with government tech priorities—as well as unicorns across various industries.

A significant portion of the national fund’s investments, at least 70%, will be directed towards seed and startup firms. The fund will primarily target smaller companies with valuations not exceeding 500 million yuan, and individual deals will be capped at 50 million yuan. Strategic emerging and future industries will receive priority. Furthermore, the three regional funds are specifically planning to invest in sectors such as integrated circuits, quantum technology, biomedicine, brain-computer interfaces, and aerospace.