China looks to boost PE participation by domestic insurers
Chinese Premier Li Keqiang has asked regulators to encourage investment by insurance companies in private equity and venture capital through measures such as shorter post-IPO lock-up periods.
The comment was made during a State Council meeting. No further details were given on this or other measures, according to a statement. At present, major shareholders are subject to a lock-up of at least 12 months and it can be as much as 36 months for other investors.
Li said the government's priority for 2022 is ensuring steady growth and stable employment. Start-ups and entrepreneurial activity in general are regarded as important sources of job creation.
GDP growth in China was 2.5% in the first half of 2022 and just 0.4% in the second quarter amid pandemic-related lockdowns, weaker exports, and concerns about the property sector. The full-year target is 5.5%, but most investment bank economists consider this unrealistic. Last month, Goldman Sachs and Nomura adjusted their forecasts to 3% and 2.8%, respectively.
Beijing has introduced various stimulus measures, including CNY 300bn (USD 44bn) in credit support from policy banks.
In addition, a slew of measures to bolster small- and medium-sized enterprises (SMEs) was announced at the recent State Council meeting, including favourable lending terms. Government-funded incubation bases were also instructed to provide space to start-ups without charge where possible.
At the same time, regulators are emphasizing labour rights and job security. This was a topic of discussion when the Ministry of Human Resources & Social Security met with 11 leading platform internet companies, including Meituan, Ele.me, and Didi.
Venture capital and private equity funds are essential to China's start-up ecosystem, but it is estimated that government agencies and state-owned enterprises account for 70% of capital committed to renminbi-denominated funds. Fundraising from commercial entities has retreated significantly in recent years.
At the same time, geo-political tensions between China and the US and domestic regulatory action have curtailed US dollar-denominated fundraising.
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