Beijing’s Bold Move: Encouraging Big Banks to Invest in Struggling Start-ups – A Significant Shift or a Risky Gamble?

Beijing promotes investment in floundering start-ups, but are major banks prepared?

Analysts suggest that Beijing's push for banks to increase investment in private companies signifies a significant step in their attempt to assist start-ups.

The financial investment divisions of major commercial banks in China have been granted permission by the authorities to enhance their allocations to private firms, according to Li Yunze, the head of the National Administration of Financial Regulation (NAFR). He revealed this information in a briefing on Tuesday. There has also been an increase in the maximum investment limit in a single private-equity fund, which has risen from 20 per cent to 30 per cent.

He stated that the percentage of equity investments on the balance sheet will increase from 4 per cent to 10 per cent.

"It's not common for giant Chinese state-run banks to directly invest in tech start-ups," stated Li Ying, who leads financial institution ratings at S&P Global (China) Ratings. "Therefore, the new policy revealed [on Tuesday] is quite noteworthy,"

"Relaxing constraints indicates to the market that bank resources will have a larger influence in the finance sector, particularly in amalgamations and takeovers," stated Su Jinyu, a partner at Jingtian & Gongcheng, a law firm located in Beijing.