China Expands Role of State Bank-Backed Equity Investors to Aid Tech and Innovation

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The pilot program, launched by the National Financial Regulatory Administration, the Beijing municipal government and the National Development and Reform Commission, expands the investment scope of the AICs beyond their traditional focus on debt-to-equity swaps

China has embarked on a pilot program allowing asset investment companies (AICs) to expand into venture capital investment in Beijing aiming to drive forward the technology and innovation sectors.

China currently has five AICs, each backed by one of the major state banks: the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the Bank of China (BOC), the China Construction Bank (CCB) and the Bank of Communications (BoCom).

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China launched a pilot program in Beijing allowing state-backed asset investment companies (AICs) to engage in venture capital investment to boost tech and innovation.
The program, supported by the National Financial Regulatory Administration, aims to leverage state banks' strengths in tech finance and risk management to drive early-stage and small-scale investments.
Despite having large assets—ICBC Financial Asset Investment with 178.6 billion yuan and ABC Financial Asset Investment with 122 billion yuan—AICs have executed few direct equity deals so far.

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Who’s Who

ICBC Financial Asset Investment Co. Ltd: ICBC Financial Asset Investment Co. Ltd., established in 2016 by the Industrial and Commercial Bank of China, has focused on debt-to-equity swaps. By the end of 2023, it reported total assets of 178.6 billion yuan. It supports tech and innovation investments and has partnered in funds, including a 10 billion-yuan fund targeting technology, biotech, health care, carbon reduction, and advanced manufacturing.

ABC Financial Asset Investment Co. Ltd.: ABC Financial Asset Investment Co. Ltd., backed by the Agricultural Bank of China, focuses on debt-to-equity conversions. In the 2020 Shanghai pilot, the company co-established a 600-million-yuan fund with JZ Capital and CPI Ronghe Asset Management to invest in high-tech sectors. By the end of 2023, ABC Financial Asset Investment reported total assets of 122 billion yuan. It is now part of a pilot in Beijing expanding into direct equity investments in early-stage tech companies.

Zhong Ou Asset Management Co. Ltd.: Zhong Ou Asset Management Co. Ltd. is mentioned in the article as one of the partners in a 10 billion-yuan ($1.4 billion) equity investment fund. This fund is backed by ICBC Financial Asset Investment Co. Ltd and JZ Capital, focusing on investments in technology, biotech, health care, carbon reduction, and advanced manufacturing.

JZ Capital: JZ Capital is mentioned as a partner in equity investment funds established in Shanghai, supporting investments in technology, biotech, health care, carbon reduction, and advanced manufacturing. They participated in a 10 billion-yuan fund with ICBC Financial Asset Investment Co. Ltd and Zhong Ou Asset Management Co. Ltd., as well as a 600-million-yuan fund with ABC Financial Asset Investment Co. Ltd and CPI Ronghe Asset Management Co. Ltd.

CPI Ronghe Asset Management Co. Ltd.: The article mentions CPI Ronghe Asset Management Co. Ltd. as a partner in a 600-million-yuan fund with ABC Financial Asset Investment Co. Ltd. and JZ Capital. This fund targets investments in technology, biotech, health care, carbon reduction, and advanced manufacturing.

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What Happened When

2016：: Established in 2016, the five AICs were created to engage in debt-to-equity swaps as part of the country’s deleveraging campaign.

2020：: The former China Banking and Insurance Regulatory Commission gave approval to the five AICs to make pilot equity investments in Shanghai.

By the end of 2023：: ICBC Financial Asset Investment reported total assets of 178.6 billion yuan, ABC Financial Asset Investment had 122 billion yuan, while their peers backed by CCB, BoCom, and BOC posted assets of 129 billion yuan, 65 billion yuan, and 87.9 billion yuan, respectively.

January 2024：: The State Council issued a directive promising to promote high-quality venture capital development, including expansion of direct equity investment pilots by AICs.

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