Shenzhen-Hong Kong Cooperation Mechanism Innovation: “18 Measures” for Qianhai Shenzhen-Hong Kong Venture Capital Joint Development Released

The Shenzhen-Hong Kong cooperation mechanism has introduced a new policy. On September 2, “Shenzhen Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone Administration – Hong Kong Special Administrative Region Government Financial Services and the Treasury Bureau on the 18 Measures to support Qianhai Shenzhen-Hong Kong Venture Capital Joint Development” (hereinafter referred to as “18 Measures”) was released in Shenzhen and Hong Kong, according to the Authority of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone.

In response to the Hong Kong financial industry’s call for broader cooperation channel between Shenzhen and Hong Kong private equity funds, the “18 Measures” clearly stipulates that a one-time reward of 2 million yuan will be given to the Qianhai venture capital institutions listed on the Hong Kong Exchange. The Qianhai venture capital institutions and their wholly owned subsidiaries in Hong Kong will be granted a one-time reward of 1 million yuan for sponsoring a Special Purpose Acquisition Company and getting it listed on the Hong Kong Exchange. For a Qianhai high-quality infrastructure project listed on the Hong Kong Exchange in the form of REIT, a one-time incentive of 1 million yuan will be given to the project’s equity owner. Analysts believe that this move will further facilitate the two-way cross-border investment cooperation between Shenzhen and Hong Kong.

The policy is an important attempt for deepening cooperation between Shenzhen and Hong Kong in Qianhai. Cooperation mechanism innovation, the building of cluster economy, the incentives for closed loop are highlights that sparked industrial attention.

The industry insiders believe that the “18 Measures” is a solution to the challenges of the private equity industry in Shenzhen and Hong Kong. Taking into account the demands of the Hong Kong industry, it will optimize the pilots in the Qianhai qualified foreign limited partners (QFLP), qualified domestic investment enterprises (QDIE) and wholly foreign-owned enterprise private fund management (WFOE PFM); at the same time, Qianhai QDIE management enterprises are encouraged to invest in Hong Kong’s technological innovation, with a reward of 2% of the actual investment, or a maximum of 500,000 yuan for single input and annual accumulative sum of up to 2 million yuan for each enterprise.

According to the “18 Measures”, a Shenzhen-Hong Kong international venture capital cluster will be established in Qianhai. The cluster is located in Qianhai Shenzhen-Hong Kong International Financial City, with an area of about 800,000 square meters. It will host large funds, international capital management institutions, leading venture capital institutions as well as private equity investment institutions.

Thanks to the in-depth development of financial cooperation between Shenzhen and Hong Kong, a number of Hong Kong-funded equity investment enterprises with special advantages and benchmark effects had already set up business in Shenzhen. Statistics show that of all the foreign-invested equity investment management enterprises in Shenzhen, those with Hong Kong funds account for nearly 70%. Likewise, among the two types of QFLP pilot enterprises, those involving Hong Kong funds account for about 80% of the total.

Observers said that the “18 Measures” provides all-round support for venture capital institutions, while promoting private equity secondary market funds (S funds). It covers fund-raising, investment, management and withdrawal, the whole process of venture capital industry. The wide range of benefits make the policy a new breakthrough, which is of great significance to deepening Shenzhen-Hong Kong financial cooperation on practical innovation.

Source: Authority of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone