Beijing Launches 100 Billion Yuan Internet Fund

(Beijing) — China will form a government-led internet fund with an eventual target of 100 billion yuan ($14.5 billion) in capital, as state-run companies try to carve out a place in a lucrative sector increasingly dominated by private firms.

The new China Internet Investment Fund has already attracted 30 billion yuan in firm commitments, and will count the powerful Cyberspace Administration of China, the Ministry of Finance and the Communist Party’s Publicity Department among its primary backers, according to an announcement posted Monday on the Finance Ministry website.

Other agencies providing support include the Ministry of Industry and Information Technology, which is China’s telecom regulator, as well as the powerful National Development and Reform Commission, the nation’s state planner, according to other media sources.

Initial investors include such industry heavyweights as China Mobile Ltd., the country’s biggest wireless carrier, and the Industrial and Commercial Bank of China Ltd., the nation’s top bank.

The fund’s principle aims will include promoting new areas of development on the internet and bringing more outside areas of expertise into the medium, Finance Vice Minister Yu Weiping said at a ceremony to announce the fund’s formation.

“The China Internet Investment Fund will steadfastly guide the nation’s strategic development and commercialization and professionalization,” the Finance Ministry said in its announcement. “It will focus on important internet areas and support innovation and new developments at outstanding companies using market forces.”

The fund’s launch comes as Chinese state-run companies get increasingly marginalized on the nation’s internet, which is now dominated by private firms. According to a new report this week from the China Internet Network Information Center, the country now has 91 listed internet companies with a total market value of 5.4 trillion yuan. Two private companies, e-commerce giant Alibaba Group Holding Ltd. and leading game operator Tencent Holdings Ltd., accounted for more than half of that total.

China’s major telecoms carriers and companies like traditional state-run banks enjoyed huge advantages over their private peers in the early internet era thanks to their deep resources and government support. But they mostly squandered those opportunities to more-nimble private companies like Tencent and Ant Financial, which are now some of the most-innovative players in the fast-evolving world of web-based products and services.

Venture-funded Alibaba and Tencent have been two of the biggest success stories, both now boasting market values that are bigger than U.S. giants eBay Inc. and Intel Corp., and more than half the size of global leaders Amazon.com Inc. and Facebook.

Contact reporter Yang Ge (geyang@caixin.com)