China Banking and Insurance Regulatory Commission: Increase support for technological innovation in pilot areas to promote the growth of technology-based enterprises.

On September 24th, the China Banking and Insurance Regulatory Commission issued a notice regarding the expansion of pilot work on equity investment by financial asset management companies. It mentioned that the pilot scope will be gradually expanded to include regions that meet the conditions. Regions included in the pilot scope for equity investment by financial asset management companies should have strong economic strength, a large number of technology companies, significant R&D investment, and active equity investment. Officials from the relevant department of the financial regulatory commission answered questions related to the policy measures. The notice stated the need to increase support for technological innovation. Business pilots should be conducted in accordance with laws and regulations. Business operations should be carried out prudently according to the relevant quota requirements. The amount of equity investment using on-balance sheet funds by financial asset management companies should not exceed 10% of the company's total assets at the end of the previous quarter, and the amount of investment in a single private equity investment fund should not exceed 30% of the fund's issuance size. Large banks should set reasonable business permissions for equity investment pilot projects for financial asset management companies. These companies should conduct thorough due diligence on equity investment projects in accordance with the risk preference determined by the group and strictly follow business approval processes. The original text includes further details and instructions related to the expansion of equity investment pilot projects for financial asset management companies, with a specific focus on supporting technological innovation and ensuring effective risk management measures.Market analysis and asset valuation management, continuously improving the level of entrepreneurship investment and equity investment.Financial asset investment companies in Shanghai conducting equity investment pilot business shall comply with the relevant requirements of this notice. Officials from the relevant bureaus of the China Banking and Insurance Regulatory Commission answered questions from reporters regarding the "Notice on Doing Well in the Expansion of Equity Investment Pilot Work for Financial Asset Investment Companies" and the "Notice on Expanding the Scope of Equity Investment Pilot for Financial Asset Investment Companies." The China Banking and Insurance Regulatory Commission recently issued the "Notice on Doing Well in the Expansion of Equity Investment Pilot Work for Financial Asset Investment Companies" (Jinbanfa [2024] No. 100, hereinafter referred to as the "Pilot Work Notice") and the "Notice on Expanding the Scope of Equity Investment Pilot for Financial Asset Investment Companies" (Jinban Bianhan [2024] No. 1210, hereinafter referred to as the "Pilot Scope Notice"). Officials from the relevant bureaus of the China Banking and Insurance Regulatory Commission answered questions from reporters regarding the relevant policy measures. 1. What is the background for the formulation of the relevant policy measures? Currently, indirect financing still dominates the total social financing in China, indicating the need to explore a path of development for technology finance, especially in technology innovation investment, with Chinese characteristics. Since 2020, financial asset investment companies under large commercial banks have been conducting equity investment pilots in Shanghai, exploring paths, accumulating experience, and training teams, thereby meeting the conditions for expanding the pilot. In accordance with the relevant deployment of the State Council Office in June 2024 "Several Policy Measures to Promote High-Quality Development of Entrepreneurial Investment" (Guobanfa [2024] No. 31), to effectively play the guiding role of the pilot, promote the development of entrepreneurial investment, and cultivate patient capital, the China Banking and Insurance Regulatory Commission recently issued the "Pilot Work Notice" and the "Pilot Scope Notice" after fully absorbing relevant opinions from ministries, financial institutions, and local governments. 2. Which cities will be included in the pilot scope next? The "Pilot Work Notice" proposes that the regions included in the equity investment pilot by financial asset investment companies should meet criteria such as strong economic strength, a large number of technology companies, significant research and development investment, and active equity investment. Based on these criteria, relevant departments will expand the scope of equity investment pilot by financial asset investment companies from Shanghai to 18 large and medium-sized cities including Beijing, Tianjin, Shanghai, Chongqing, Nanjing, Hangzhou, Hefei, Jinan, Wuhan, Changsha, Guangzhou, Chengdu, Xi'an, Ningbo, Xiamen, Qingdao, Shenzhen, and Suzhou. 3. Compared to the Shanghai pilot, what adjustments have been made in the policy for this expanded equity investment pilot? The "Pilot Work Notice" has made the following adjustments to the policy of the Shanghai pilot: First, it has appropriately relaxed the restrictions on the amount and proportion of equity investment. The proportion of the amount of equity investment by financial asset investment companies using on-balance sheet funds to total assets at the end of the previous quarter has been increased from the original 4% to 10%, and the proportion of the investment in a single private equity fund to the scale of the fund's issuance has been increased from 20% to 30%. Second, it further improves the due diligence and performance evaluation system. It guides financial asset investment companies to implement due diligence requirements based on the rules and characteristics of equity investment business, improves error correction mechanisms, and establishes a sound performance evaluation system with long cycles and differentiation. 4. What are the main requirements for the management and risk control of equity investment pilot business of financial asset investment companies? The "Pilot Work Notice" requires financial asset investment companies to strictly comply with relevant regulations and regulatory requirements, establish and improve relevant systems and processes for equity investment business, and conduct pilot equity investment business based on market-oriented and legal principles, under the premise of lawfulness, risk control, and commercial sustainability. Financial asset investment companies must conduct equity investment through the issuance of private equity investment funds by subsidiary institutions and the related business must comply with the regulations of private equity investment fund supervision and management; enhance the risk management capabilities of equity investment business, establish and improve risk management systems, strengthen risk management foundations, and effectively control various risks; optimize internal management processes, establish a sound hierarchical authorized management system, strengthen talent team construction, and continuously enhance the level of entrepreneurial investment and equity investment. 5. What work will the China Banking and Insurance Regulatory Commission carry out next? The China Banking and Insurance Regulatory Commission will guide five financial asset investment companies to conscientiously implement the relevant policy measures and actively promote the landing of more projects. At the same time, in conjunction with relevant departments, it will timely summarize experiences, continuously optimize supporting policies, continue to research expanding the scope of pilot cities, and effectively promote the effectiveness of pilot work. This article is selected from the official website of the China Banking and Insurance Regulatory Commission, edited by GMTEight: Jiang Yuanhua.