As flights approach Pudong Airport, passengers are treated to a striking sight: a perfectly round glimmering lake that seems to merge with the East China Sea nearby, resembling a droplet of water suspended in the sky.
To the north of this lake, a skyline of towering buildings appears to be constantly evolving. This area is the under-construction Dishui Lake Financial Bay, located in the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone. Its ambition is to develop into the “third pole” of Shanghai’s international financial center, following the Bund and Lujiazui financial districts.
“More than twenty years ago, this was merely a stretch of wetlands, and now it has transformed into a new high ground for development,” observed a participant at the 2024 China Venture Capital Forum held on October 12 by the China Democratic National Construction Association. The forum’s theme, “Confidence, Patience, and Building the Future Together,” resonated well with the significant transformations in the Lingang area, serving as a poignant example for attendees.
Since its inception five years ago, the Lingang New Area has signed over 570 cutting-edge technology projects, attracting about 620 billion yuan in investment. Amidst a changing economic landscape, the forum sought answers on how to cultivate seeds of confidence and patiently develop innovative companies, ensuring that capital forms a lasting partnership with time to flourish into a vibrant future.
The attendees of the forum also visited the Shanghai Lingang Large Aircraft Industrial Park. The park is a testament to advancements in automation, with automated guided vehicles (AGVs) operating around the clock at Yangshan Deep-Water Port, which is being continuously expanded. As one of the world’s leading automated container ports, Yangshan represents China’s intelligent transformation of its port operations.
New technologies and models have fostered new productivity in the shipping industry, primarily driven by high-tech enterprises propelling industrial innovation, an evolution made possible with the support of venture capital.
During the forum, Hao Mingjin, Vice Chairman of the National People’s Congress Standing Committee and Chairperson of the China Democratic National Construction Association, emphasized that “China’s venture capital must find its place within the broader agenda of comprehensively deepening reforms and advancing modernization, contributing effectively to the development of new productive forces.” He called for active integration between venture capital and technological innovation and for leveraging venture capital’s essential role in driving high-quality economic growth.
In July, the Third Plenary Session of the 20th Central Committee of the Communist Party made clear policies about encouraging and regulating angel investments, venture capital, and private equity investments, aiming to develop what they term “patient capital.”
Qin Boyong, Executive Vice Chairman of the China Democratic National Construction Association, echoed these sentiments in her keynote speech, noting that this direction should guide the future development of the venture capital sector. She stressed the importance of recognizing the significance of developing venture capital and promoting patient capital to boost new productive forces, tackling both how we view these issues and how we operationalize them.
In 2023, Shanghai led the nation with a staggering 103.97 billion yuan in venture capital investments. A recent report titled “2024 China Venture Capital Development Annual Report” presented at the forum revealed the sector’s growth, though it also noted that the industry is shifting from a phase of rapid expansion into one of reconfiguration and adjustment due to macroeconomic pressures.
Despite steady growth in venture capital funding, the report discovered that there is a relative shortage of long-term investment funds, with pensions, insurance funds, and social welfare funds contributing less than 5% to the primary market’s funding sources. The report highlighted that most funds desire short-term returns, lacking the patience and confidence for long-term projects, leading to widespread speculative behavior as opposed to sustained capital that accompanies companies through their growth journey.
To foster more patient capital, Wu Xiaoqiu, Dean of the National Institute of Financial Research at Renmin University, suggested that national policy orientation is clear and favorable, advocating for sufficient liquidity in the capital markets and enhancing the competitive structure of listed companies.
“The ecosystem of China’s capital markets is undergoing profound changes,” Wu noted. He highlighted the importance of developing patient capital and emphasized that while ensuring market liquidity and improving systems, the focus should be on enhancing the competitiveness of listed companies to attract more funds into patient capital.
Tian Xuan, Dean of the National Institute of Financial Research at Tsinghua University, also stressed the need to encourage corporate venture capital investments. He explained that companies engage in venture capital for strategic reasons, often supporting early-stage projects with solid financial backing and a tolerance for failure since their focus isn’t solely on financial returns and they typically have a longer lifespan.
Managing the growth of innovative enterprises requires not just patient capital, but a systemic approach. The Lingang New Area’s Large Aircraft Industrial Park has already begun to consolidate a global supply chain, elevating international collaboration. With a target of exceeding 40 billion yuan in aviation industry output by the end of 2026, the park continues to explore ways to support the healthy growth of tech-based enterprises.
“To turn technological innovation from fundamental research into industrial application, you must cross the ‘valley of death’ from stage one to ten,” shared Gong Wei, Vice President of Shanghai Lingang Group, during the forum. “The transformation of technological achievements requires not only the continued support of venture capital and patient capital but also the backing of the government, industry, academia, and research.”
Gong highlighted the importance of being a connector, converter, and amplifier of various resources, supporting innovative companies to successfully leap over the challenging ‘valley of death’ and meet their full-cycle development needs.
“In discussions about cultivating patient capital, we must recognize that patience needs to flow in both directions—capital must exercise patience with enterprises, and entrepreneurs themselves must also embody patience,” commented Dai Wenyuan, Chairman and CEO of Beijing Fourth Paradigm Group, offering a perspective from the business community.
From his point of view, success in risk investment lies in identifying the right industry’s track and discovering the best companies within it. Dai emphasized the urgent need to refine the capital market to better support venture capital operations and foster the growth of innovative enterprises.
