Finance Ministry, CDB unit to spearhead investments by infusing initial capital in new fund amid signs of faltering manufacturing. Fund to invest in sectors including new materials, new-generation information technology and electric-power equipment, among others.
China is turning to its tobacco monopoly and a bunch of state-controlled entities to help form a 147 billion yuan (US$21 billion) fund to support a faltering manufacturing sector amid a bitter trade war with the US.
The Ministry of Finance will infuse 22.5 billion yuan of initial capital for a 15.29 per cent stake in the vehicle known as the National Manufacturing Industry Transformation and Upgrade Fund, according to a Hong Kong stock exchange filing late Monday.
China Development Bank Capital Corp will contribute 13.59 per cent, while China National Tobacco Corporation and China National Insurance Fund will take up 10.19 per cent each.
China rolled out policy stimulus this week by trimming interbank rates for the first time since 2015 to inject liquidity in the system after the economy grew last quarter at the slowest pace on record amid a slowdown in factory production and exports.
The new fund is an example of state-led firepower that the US complained as unfair competition in the marketplace
“The fund company will invest in sectors including new materials, new-generation information technology, electric-power equipment, which have a certain level of synergy with our operations,” according to a filing by CRRC Corp, the nation’s biggest train maker.
“This investment will facilitate the creation of an innovative investment model and the effective blending of industry and capital.”
The fund faces risks including the inability to find suitable targets and a relatively long payback period over its 10-year lifespan, according to CRRC.
The train maker is joining the investment fund among 17 other entities as minority shareholders, including electric-power equipment maker Shanghai Electric Group, carmaker FAW Group, and electric bus manufacturer Zhengzhou Yutong Bus, according to the filing.
China has established multiple such investment funds in the past, based on its economic development strategies, such as the US$40 billion Silk Road Fund in 2014 to fund economic cooperation and infrastructure projects under its global Belt & Road Initiative.
Others include the China Culture Industrial Investment Fund, a 20 billion yuan vehicle spearheaded by the Ministry of Finance, BOC International Holdings, China International Television Corp and Shenzhen International Culture Industry Expo Company to bolster its “soft power.”
In 2014, the China National Integrated Circuit Industry Investment Fund raised an initial sum of 138.7 billion yuan to promote self-sufficiency and parity in the semiconductor industry.