The following Chinese government policy document provides guidelines for how state investment funds should operate. China uses government investment funds, or “guidance funds,” to promote the development of different industries, most notably strategic high-tech and emerging industries. This policy prescribes various ways to mitigate the problems associated with government investment funds, such as local governments using them to poach companies and talent from their neighbors, incompetent or overly risk-averse fund managers, and bureaucratic micromanagement of investment decisions.

An archived version of the Chinese source text is available online at:    https://perma.cc/FY38-VF9J

Guiding Opinions of the General Office of the State Council on Promoting the High-Quality Development of Government Investment Funds

State Council General Office [2025] Document No. 1 (国办发〔2025〕1号)

To the people’s governments of all provinces, autonomous regions, and province-level municipalities, and all ministries and commissions of the State Council and their subordinate agencies:

Government investment funds are investment funds that are established by governments at all levels through budgetary arrangements, are either solely government-funded or jointly funded together with social capital,¹ and use market-oriented methods such as equity investment to channel various types of social capital to support the development of related industries and fields, as well as innovation and entrepreneurship. They play an active role in serving national strategies, promoting industrial upgrading, and facilitating innovation and entrepreneurship. The following Opinions are hereby proposed with the consent of the State Council in order to construct a more scientific and efficient government investment fund management system and promote the high-quality development of government investment funds.

I. Overall Requirements

Adhering to Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guide, we shall deeply implement the spirit of the 20th Party Congress and the Second and Third Plenums of the 20th Chinese Communist Party (CCP) Central Committee, fully, accurately, and comprehensively implement the new concept of development (新发展理念), persist in and strengthen the Party’s overall leadership, fully exploit the decisive role of the market in allocating resources, and make better use of the role of government, thereby promoting a better combination of effective markets and assertive government (有为政府). Highlight the guiding role of the government and policy-oriented positioning, regulate the operations of government investment funds in accordance with the principles of marketization, the rule of law, and professionalization, and develop patient capital, with the focus on achieving real results. Improve graded and categorized (分级分类) management mechanisms, and rationally plan the overall layout of funds, so as to prevent homogenized competition² and crowding out of social capital. Improve responsibility mechanisms with consistent rights and responsibilities and compatible incentives and constraints, so as to fully mobilize the enthusiasm of fund managers. Abiding by the underlying principles of industry development, strengthen the coordination of policies and institutions, maintain strict financial discipline, effectively prevent risks, and promote the formation of a pattern of high-quality development of government investment funds of suitable scale, reasonable layout, standardized operation, scientific efficiency, and controllable risks.

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1. Translator’s note: The Chinese term 社会资本, translated literally as “social capital,” refers to any source of funding outside of government budget outlays. This term encompasses investment by private individuals and private institutions. However, investment from state-funded entities such as state-owned enterprises (SOEs), including state-run banks, also falls under the umbrella of “social capital.”
2. Translator’s note: “Homogenized competition” (同质化竞争) refers to a market dynamic common in China in which competing brands imitate each other’s design, packaging, functionality, marketing methods, and so on, which eventually leads to a situation in which many unremarkable brands compete to sell virtually indistinguishable products and services. As applied to government investment funds, it refers to a situation in which many local governments compete with each other to lure the same technology companies to set up shop in their areas, using similar funding models and other incentives.