Local governments in China have assumed roles in directing funds into advanced sectors such as semiconductors, biopharmaceuticals and AI. The inherent risks associated with venture capital and private equity mean that these government-backed funds – whether provided directly or through equity in sub-funds supported by private capital – often have too short a lifespan for companies to reach full maturity. As a result, funds may be withdrawn if recipients do not meet expectations. Furthermore, governments require private investors to allocate a portion of their investments to local enterprises, which can complicate partnerships. To address these issues and promote market fairness, new regulations introduced in August grant investors the right to sue governments for nontransparent operations. Experts recommend that underdeveloped regions focus on enhancing their unique industries, rather than replicating industries from developed coastal areas, to attract investment and reduce regional investment disparities.
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