A Review of Government Venture Capital in China: History, Drawbacks and Remedies

Abstract

The past 40 years have witnessed the growth of government venture capital (GVC) in China. This work reviews the brief history of GVC in China, as an example of emerging markets, and puts forward several major drawbacks. First, it is unclear which bureau is exactly responsible for GVC, resulting in redundant, sometimes conflicting regulations. Second, a lack of integrated financial planning leads to a mismatch between the situation of local enterprises and actual investments. Moreover, due to the lack of a market-oriented management system, GVC fund managers are not fully motivated. We propose corresponding remedies and discuss the implications.