Apr 10, 2017 07:41 PM

Tianjin Jumps On Industry-Fund Bandwagon

(Beijing) — Tianjin’s municipal government has unveiled an ambitious plan to raise as much as 500 billion yuan ($72 billion) from banks and the private sector to stimulate economic growth and promote innovation.

The Tianjin Haihe Industry Fund, a government guidance fund, will invest in and provide financing for companies in 10 pillar industries including high-end equipment manufacturing, information technology, aerospace, petrochemicals, environmental protection, new energy, energy-saving and new energy vehicles, new materials, biomedicine, and internet.

Support will also be provided to seven emerging industries — marine engineering equipment, ultra-high-voltage power transmission, high-end computer numerical control (CNC) machine tools, robotics, integrated circuits, high-performance servers, and data center and Big Data, the local government said at the launch of the fund on April 8.

The municipal government has seeded the fund with 20 billion yuan of its own money and has been promised a total of 100 billion yuan over the next five years from financial institutions comprising Industrial and Commercial Bank of China Ltd, China Construction Bank Corp., Bank of China, Bank of Beijing, CITIC Group Corp Ltd., China Insurance Investment Fund, and China Minsheng Investment Corp Ltd.

“Our objective is to realize the government’s goals using market mechanisms,” Wan Jinhong, chairman of the fund management firm overseeing Tianjin Haihe Industry Fund, told Caixin in an interview. “The fund will give priority to Tianjin, but will not be limited to Tianjin.”

The municipality, like all local governments, is pouring money into supporting the central government’s Made in China 2025 initiative to upgrade manufacturing and promote innovation. Tianjin has also been designated as a national research and development base for advanced manufacturing under the strategy to integrate Beijing, Tianjin and Hebei province, a project known as Jing-Jin-Ji that was launched in 2015.

Government guidance funds have developed rapidly since 2014 when the State Council issued Document 43, a set of rules and guidelines aimed at managing and controlling risks posed by trillions of yuan of local government debt. The document effectively restricted local authorities’ ability to raise money through off-balance-sheet local government financing vehicles. To circumvent the curbs, local officials set up other financing platforms such as urban development funds, public private partnerships and industrial funds. The guidance funds also channel money into industries the local government wants to support.

The number of government guidance funds surged last year, according to figures from data provider CVSource. A total of 444 funds were launched in 2016 involving a combined fundraising target of 1.3 trillion yuan, exceeding the 998 billion yuan total announced over the previous three years. At the end of 2016, CVSource data showed there were 901 government guidance funds with a total planned investment of 2.4 trillion yuan.

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