What is the path to breaking through the homogenization dilemma of capital investment?

In 2013, Mr. Zhang Jiahao, a renowned investor, proposed the concept of "capital investment promotion" nationwide to promote the development of Anhui's industrial economy and promote communication between the government and enterprises. He also initiated the establishment of the Anhui Provincial Investment Promotion Association. The proposal of the concept of "capital investment attraction" breaks the dilemma of whether the government should attract capital or through capital attraction. After ten years of development, Anhui has achieved remarkable results in "capital investment attraction" in Hefei, with remarkable cases.

Learn from Anhui

Has become a new phenomenon in the political circle

From February 18th to 19th, a party and government delegation from Jiangxi Province visited Anhui for inspection. From March 16th to 17th, Chen Jining, Secretary of the Shanghai Municipal Party Committee, and Gong Zheng, Deputy Secretary and Mayor of the Shanghai Municipal Party Committee, led the Shanghai party and government delegation to Anhui for inspection and exchange. From March 21st to 22nd, a party and government delegation from Jiangsu Province conducted an inspection tour in Anhui, including Secretary of the Provincial Party Committee Xin Changxing, Deputy Secretary of the Jiangsu Provincial Party Committee, and Governor Xu Kunlin. On March 10-11, Fu Zhenbo, Director of the Hebei Provincial Department of Industry and Information Technology, led a research team from the Provincial Department of Industry and Information Technology and Xingtai Economic and Technological Development Zone to Anhui Province to investigate the development of new energy vehicles and robotics industries. From March 8th to 9th, Jia Letang, Deputy Director of the Hebei Provincial Development and Reform Commission, and his delegation went to Anhui to investigate the integrated development of the Yangtze River Delta.

At the same time, party media representing the voices of local party committees and governments have also frequently focused on Anhui. For example, the Zhejiang Daily published an article proposing to "learn from the 'investment led investment' model of Hefei. Whether it is benchmarking against traditional foreign investment highlands such as Suzhou and Shenzhen, or compared to emerging 'venture capital cities' such as Hefei and Changzhou, Ningbo and even Zhejiang still need to catch up in many aspects of investment attraction

The most typical example of Anhui is the rapidly rising "king of venture capital" Hefei, which relies on government investment.Relying on government driven investment, enterprise settlement, and ultimately forming industrial scale. For example, BOE, which has invested hundreds of billions in Hefei now. In 2007, when the Hefei government invited BOE to settle down, it still faced huge losses. Amidst numerous doubts, Hefei prepared a complete set of factory buildings, talent supply, and a comprehensive planning plan. The entire project investment was 17.5 billion yuan, of which 12 billion yuan was borne by the government, accounting for one-third of Hefei's annual fiscal revenue. In order to ensure the smooth progress of the project, the local urban rail construction in Hefei has even been suspended.

Today, after introducing BOE, Hefei has attracted 500 related supporting enterprises. At the same time, it has hosted a group of semiconductor leading enterprises such as Changxin Storage and Jinghe, and has partnered with leading new energy vehicle companies such as BYD and NIO to successfully establish a complete industrial operation model: introducing teams, leading by state-owned assets, project implementation, equity withdrawal, and circular development.

The relevant person in charge of the State owned Assets Supervision and Administration Commission of Hefei City stated, "The purpose of investment is to lead the development of the industry in Hefei. It is to achieve the preservation and appreciation of state-owned assets and the landing of industrial projects between one advance and one retreat.

It is understood that in 2022, Hefei ranked fourth in the country in terms of capital visits, second only to Beijing, Shanghai, and Shenzhen. The Hefei Municipal Government guided the Master Fund to closely contact more than 100 domestic VC/PE firms, including Sequoia Capital, Yida Capital, China Resources Capital, CICC Capital, CITIC Construction Investment, and other top VC/PE firms, in the past year, with 208 project connections. At present, the Hefei Municipal Government has guided the establishment of 47 participating mother and child funds, and collaborated with social capital to establish over 150 billion participating funds. As of February, the Hefei Municipal Government has guided the Master Fund to promote a total of 105 investment projects.

The national strategy of integrated development in the Yangtze River Delta has injected tremendous momentum into Anhui. For visits from multiple regions, Anhui also expressed its hope to deepen collaboration in pairing cooperation to assist cities in northern Anhui, major inter provincial infrastructure projects, coordinated development of key regions, and development of cooperation demonstration zones.

Anhui Venture Capital "Small Target"

300, 600 billion

In 2022, Anhui's regional innovation capability jumped to the 7th place in the country, with a GDP exceeding 4.5 trillion yuan, an increase of 3.5%; The total amount ranks among the top ten in the country, increasing by four places compared to 8 years ago, and the growth rate ranks first in the Yangtze River Delta. In the past five years, the average annual growth rate of the added value of Anhui's high-tech manufacturing industry has been 19.6%; 10% of global laptops and 20% of LCD screens are manufactured in Anhui. Among them, from 2012 to 2021, the proportion of the output value of strategic emerging industries in Hefei's above designated industries increased from 24.4% to 54.9%, and the contribution rate to industrial growth increased from 30.5% to 71.6%. In 2022, the contribution rate of new industries in Hefei to industrial growth has reached as high as 84%.

At the same time, the construction of the Anhui Hefei Comprehensive National Science Center has been launched, and the first national laboratory in China has been settled in Anhui. There are 12 large science facilities under construction and planned, ranking among the top in the country. In today's frenzied competition for technological talents in the venture capital industry, Anhui is also unwilling to be outdone and is focusing on building ten emerging industries such as new generation information technology and artificial intelligence.

In order to attract top global venture capital and venture capital institutions to land in Anhui, Anhui Province has continuously introduced specific measures since the beginning of the year, such as establishing a provincial emerging industry guidance fund with a total scale of no less than 200 billion yuan, promoting the pilot of Qualified Foreign Limited Partners (QFLP) in Hefei, Wuhu, and Bengbu cities, and promoting the vigorous development of innovation and entrepreneurship capital in the province.

Recently, Hefei High tech Zone has released 30 specific policy measures, focusing on institutional agglomeration, business innovation, cost reduction, fund investment, capital market, free trade innovation, talent introduction, construction of ecology and technology empowerment, to promote a virtuous cycle of technology industry finance. This includes establishing a government guidance fund with a total scale of no less than 10 billion yuan over five years, establishing a special fund in conjunction with provincial and municipal state-owned platforms, and focusing on supporting "dual recruitment and dual attraction"; Specific measures such as expanding district level angel investment funds and creating a "Silicon Valley" venture capital and venture capital block at the University of Science and Technology.

On the basis of learning from the experiences and practices of Shanghai, Jiangsu, Zhejiang, Shandong, Qingdao, Shenzhen and other places, Anhui has issued the "Several Measures to Support the High Quality Development of Venture Capital and Entrepreneurship Investment" and issued "20 articles" to support the high-quality development of venture capital and entrepreneurship investment,By the end of 2026, it is proposed to strive for 300 management institutions such as venture capital and venture capital in the province, and the management scale of venture capital and other funds to reach 600 billion yuan, gradually forming a highland of innovation and entrepreneurship capital with significant national influence.

This includes strengthening government fund allocation support, and the total amount of actual contributions from provincial financial funds, government guidance funds or master funds, and local state-owned sole proprietorships to sub funds can be relaxed to 50% of the total paid in sub funds. There is no upper limit requirement for the proportion of angel sub funds invested; Focus on fund investment, establish a two-way push and docking mechanism between the provincial and municipal listing reserve resource pool and the list of venture capital and venture capital institutions, and guide venture capital and venture capital institutions to invest in listed reserve resource pool enterprises; Focusing on fund management, improving the investment decision-making mechanism of provincial-level government equity investment funds. The government guides the fund or master fund to participate in sub funds with a proportion of less than 30% (including), and may not assign directors or set a veto power; Optimize the management mechanism and relax restrictions on the duration, management fee allocation method, and investment loss allowance rate of venture capital and venture capital sub funds participating in provincial government equity investment funds; Focus on fund exit, implement the "Welcome Pine Action" plan for enterprise listing, and include eligible venture capital and venture capital fund invested enterprises into the reserve resource pool for listing cultivation.

This year's Anhui Provincial Government Work Report proposes that by 2027, the total economic output of the province will sprint towards 7 trillion yuan, and the per capita regional gross domestic product will reach over 110000 yuan. From a series of important measures to support the development of the mother fund and venture capital, in addition to regular recruitment of venture capital institutions and rewards, efforts are also being made to improve the innovative market environment, and multiple measures are being taken simultaneously.

Capital investment has become a disaster

What is the way out for government investment?

The new consensus among local governments is that projects are the support for economic development, and investment attraction is the key. After this year's two sessions, "stimulating the vitality of private investment" has been included in various government work reports, and "competing for the economy" has become a hot topic. Therefore, it is not difficult for us to understand why leaders from all over the country are busy "visiting across provinces", and local governments and industrial parks are increasing their efforts to coordinate and promote investment promotion work.

The responsibility of attracting investment undertaken by the government can also be fully reflected in the 'internal competition'.

In the past, an ordinary enterprise mainly focused on cost, location, administrative efficiency, etc. The location may be determined by looking nearby, but now the enterprise can even receive dozens of invitations within a day. In terms of tax rebates, education, funding allocation, orders, household registration, and other aspects, value-added conditions can be compared, which exacerbates the competition between local governments and parks participating in the election.

A fast-growing enterprise in the field of electronic information has seen an annual increase of 30% in its output value since settling in a county industrial park in 2015. This year, its output value is expected to exceed 180 million yuan. After entering the fast lane, there is also a major worry - the temptation to attract investment from various regions.

The person in charge stated that,There are several proposed plans for attracting investment and settling down in the office drawer. Many local investment officials have come directly to their homes and offered many tempting relocation and settlement conditions.Some have proposed a reduction or subsidy of 50 million yuan, some have offered discounts of 30 million yuan for 28 acres of land and support funds, and some have promised to merge and package with relevant local enterprises for listing Due to recognition of the business environment in the company's location, he also discussed with investors and decided not to relocate the company's current development.

Today, in addition to the Yangtze River Delta, Pearl River Delta, and Bohai Rim regions, the speed of establishing government guided funds in central and western regions such as Sichuan, Jiangxi, Hubei, and Henan has significantly increased. In addition to first and second tier cities, third and fourth tier cities are also actively layout, and sinking development has basically become one of the major trends of government guided funds. Hundreds of billions of centralized contracts and billions of individual investments are everywhere. In the field of investment attraction, tens of millions or even small projects are considered. The 'inner roll style' of digging the foot of a wall to attract investment can be said to be increasingly common.

Even in Hefei, Chen Xiaoming, Director of the Planning Department of the State owned Assets Supervision and Administration Commission of Hefei, said in an interview with the media, "Indeed, some high-quality enterprises have been poached by other provinces and cities

In order for the park to smoothly attract investment, it is not only necessary to solve its own hardware and software services, but also to strive for more policy preferential treatment and even promote top-level design. Subsequently, some ineffective actions have begun to appear, such as signing contracts without the purpose of landing or signing contracts. Reception and publicity have also become a necessary task for investment seekers. It may seem busy, but the actual landing of the enterprise is not ideal. Some companies have already experienced complaints and headaches.

The chairman of a new energy technology company stated that he has visited many parts of the country to inspect the investment environment, and some places have printed more inclusive policies than a book, providing funds, land, subsidies, and other resources. Once settled, it is easy to lose the initiative. Some of the previous promises were 'only hearing the stairs sound, no one coming down'.

Let's still refer to Hefei. Anqing Daily once reported on the investment promotion team in Hefei. The Hefei Investment Promotion Bureau has a group of hundreds of project investment promotion personnel, each responsible for researching specific industries. Every year, they spend more than 200 days searching for projects worth investing in across the country. To what extent is the team professional? When inspecting a factory in a certain place, the investment personnel looked at the factory and equipment and directly quoted: your investment amount for this project is 38 million, which surprised the company leader because the actual investment amount for this project is over 37 million.

When "capital investment attraction" is imitated by various regions, and high investment and production have become the standard configuration in various regions, the origin of capital investment attraction has become increasingly prominent. At this point, Mr. Zhang Jiahao, who is currently the chairman of the US China Investment Promotion Association and also serves as a senior economic advisor to 90 cities in China, took the lead and creatively proposed the "first and second level linkage M&A investment attraction".

Investment promotion through first and second level linkage mergers and acquisitions

Zhang Jiahao pointed out that M&A investment promotion is based on the existing high-quality industries in the local area, and through the construction of domestic and international industrial chain capital integration platforms, investment, M&A and integrated development in enterprises, technology, brands, patents, and other aspects are the core ideas for achieving differentiated investment promotion and strong industrial development. It breaks away from the homogenization and internal rolling investment promotion development model, and goes out of relying on industrial resources and capital resources, investing, merging, and Differentiated and strong development path characterized by holding shares.

——Activate the potential of investment and mergers and acquisitions, and vigorously develop the regional industrial ecology.On the basis of the original industrial investment planning and resource allocation, local governments aim to stimulate the potential of local listed companies, and effectively utilize existing capital and securities market leverage by grasping investment, mergers, controlling behaviors, and resource coordination, to assist regional industries in achieving the industrial development goals of "expanding quantity, strong clustering, and rich ecology". Forming a strong development pattern that combines "cultivating soil and planting trees" for investment promotion and "transplanting and picking fruits" for mergers and acquisitions and business gathering.

——Capital as the core, promoting industrial integration and development.In the face of severe homogenization in the competition for limited and high-quality industrial resources and the provision of investment and business conditions in various cities, the potential enterprises in the industry that are in the development stage are directly added to the local listed company sequence through investment, joint ventures, mergers and acquisitions, using the listed company platform as a starting point and through capital operation methods. While helping listed companies better implement market value management, optimize development structure, and cultivate development potential, we aim to achieve regional industrial development planning goals and address the government's macro demand for the development of regional core industries.

——Integrate operations with service assistance and market-oriented allocation of government resources as guiding tools.Currently, most of the listed companies in China with physical manufacturing as their main business have not completed the transition from focusing on industry before going public to focusing on industry integration capability construction after going public. They have integrated upstream and downstream, related industries, and advantageous enterprises, and have upgraded and transformed their development with market value management as the core logic. There are limitations in the composition of the leadership team of listed companies, as well as limitations in the integration of talent and professional service resources in regional finance, as well as difficulties for local governments to intervene in enterprise operations and provide guidance, integration, and linkage services. This is not a problem for listed companies or local governments, but a universal problem faced at the current stage of development. How can local governments interact and link their planning, organization, public and government resource investment in regional industrial development with the integration and development of mergers and acquisitions of local listed companies, forming a strong structure and differentiated competitive advantage in regional industrial development? The resolution of this core issue is the key for local governments to break away from the current red sea of industrial investment and achieve breakthrough development momentum and efficiency.