MOP20 billion fund to back only nationally aligned industries

[Photo; Yuki Lei]

The local government will establish a MOP 20 billion government-led fund by 2026 to drive industrial diversification, focusing exclusively on sectors aligned with national strategies and the development of the Guangdong-Macau In-depth Cooperation Zone in Hengqin, while strengthening integration with the Guangdong-Hong Kong-Macau Greater Bay Area.

The local authorities announced their annual plan late last month, stating that a government-guided fund will be established within the year.

According to their announcement, this fund will be capitalized using accumulated returns from fiscal reserves, with investments focused on strategic emerging industries, hard technology, the development of small- and medium-sized enterprises, and technological transformation.

Funding sources will include government fiscal resources, financial institutions, and social capital. The authorities emphasized that while the government will provide guidance, it will not interfere in daily operations, allowing professional management institutions to operate based on market principles.

During a briefing session for the industry yesterday afternoon, the authorities acknowledged that government-guided funds “represent an important measure for innovating investment and financing mechanisms, amplifying the effectiveness of fiscal resources, and supporting the real economy and industrial diversification.”

However, they also stated that the previous strategy of promoting Macau’s appropriate economic diversification through government subsidies was “single-minded,” emphasizing that guiding the participation of social capital is essential for achieving more effective outcomes in the future.

The authorities also emphasized that establishing government industrial funds and guiding funds, as proposed in the Policy Address, represents an “active” alignment with the national 15th Five-Year Plan.

They subsequently stressed that they have “fully” drawn upon the successful experiences of multiple mature markets, with Tam Chi Neng, an advisor to the Office of the Secretary for Economy and Finance, stating: “[The government-led fund] not only leverages the government’s supportive role in steering development but also aligns with the objective laws of industrial growth.”

Notably, the relevant government-guided fund will focus on connecting innovation resources across the Greater Bay Area, promoting cross-regional collaboration and the commercialization of research outcomes, thereby advancing the construction of the Greater Bay Area as an international science and technology innovation hub. Tam stressed the importance of “integrating into the development of the Guangdong-Hong Kong-Macau Greater Bay Area to fulfill the expectations and requirements of the central government.”

Tam further cited the State Council’s detailed clarification on government work, which requires government investment institutions to diligently address urgent needs and enhance support for startups in social technology.

He stated that the core purpose of the fund is to adhere to principles of long-termism and intrinsic capital, strictly observing five key elements, namely, proper channels, market operations, prudent decision-making, addressing urgent needs, and accumulating expertise. Notably, he emphasized a central principle: “Investments should target industries aligned with national strategies,” including areas such as technological innovation and livelihood security.

It is reported that over 400 private equity investment management institutions currently registered in Hengqin’s cooperation zone are eligible to apply for fund manager status.

A representative, Xu Zhongchao, managing director of CICC Capital Management Co., Ltd., noted in a media interview on the sidelines of yesterday’s briefing session that “everyone is awaiting the release of detailed guidelines for the guiding fund,” emphasizing that capital demand has already begun to emerge within the Hengqin area.

Also addressing media concerns on the sidelines of the event, the Macau Association of Banks stated that specific investment target selections may vary among banks and should refer to their respective evaluation metrics, with investment periods typically longer to align with the development of innovative enterprises.

Henry Chow, vice-chairman of the association, added that for emerging industries, banks may need to adopt new analytical approaches to assess investment value and risk, thus achieving a balanced business strategy.

“Innovative enterprises generally require time to develop their operational history, so banks must employ innovative and flexible methods for financial analysis,” he noted, describing the fund as “a significant development opportunity while also presenting certain challenges.”