China’s Tech Sector at Risk: Overreliance on State Funds Contradicts Laws, Warns Investment Guru Fang Fenglei

The tech industry in China is largely dependent on financial support from State-Owned Enterprises (SOEs) and governmental funds. Investment expert Fang Fenglei expressed concerns that this could result in significant issues within the sector, as it contradicts current Chinese legislation.

Fang, who established and now chairs Hopu Investment Management, a private equity company in China, stated on Wednesday at Mergermarket’s AVCJ Private Equity Forum China event in Beijing. He revealed that nearly 80% of last year's investments in China's tech industry were sourced from funds supported by the government and State-Owned Enterprises (SOEs).

Despite the fact that a few government-backed funds have established what are known as patient funds, focusing on long-term expansion rather than immediate financial gains, Fang, who is often referred to as China's pioneer investment banker, stated at the event that most aren't capable of doing so.

The present situation is a stark discrepancy that might result in significant issues within the industry, as it contradicts the Partnership Enterprise Law of China, established in 2007. This law prohibits state-owned enterprises from being primary partners of private companies, he explained.