Every reporter: Li Lei, Yao Yanan, every editor: Peng Shuiping
A wind of refusal to "involute" has blown into the field of local investment promotion.
Recently, the "Regulations on the Review of Fair Competition" (hereinafter referred to as the "Regulations") came into effect, which clearly states that without the basis of laws and administrative regulations or without the approval of the State Council, no tax incentives, selective and differentiated financial incentives or subsidies shall be given to specific business operators, nor shall they be given preferential treatment in terms of factor acquisition and administrative fees.
After the vigorous development of the past few decades, the traditional "flood irrigation" type of investment promotion was officially stopped this year, and there was also news of the abolition of investment promotion offices in some regions.
Without traditional means such as tax incentives and financial subsidies, what should local investment do? One of the solutions is fund investment, or capital investment, and the other is investment promotion companies, and there are places that skillfully combine "fund + investment". As more places place high hopes for fund investment, some practical problems have gradually emerged.
Rejecting the "zero-sum game", local investment promotion ushered in great changes
In the study of social behavior, there is a phenomenon that is vividly referred to as the "theater effect": in a theater performance, if the audience in the front row gets up to get a clearer view of the stage, it will quickly set off a chain reaction, eventually causing all the audience to have to stand and watch.
In the eyes of some industry insiders, there was also a "theater effect" in the previous local investment.
Since the beginning of reform and opening up, inter-regional competition has always been a prominent feature of China's socialist market economic system. Local governments have effectively stimulated market vitality and promoted rapid economic growth through fierce competition in policy formulation, project implementation, and talent introduction.
However, in the increasingly fierce competition for attracting investment, some problems have also emerged. For example, in order to attract investment, some localities do not hesitate to adopt excessive competition and provide unconventional preferential policies to increase the financial burden. For another example, some places do not actually have the industrial base and talent advantages, but insist on introducing the so-called "new industry" hot projects such as biomedicine, new energy, and intelligent manufacturing.
When one region does whatever it takes to attract investment, others have to follow suit in order to remain competitive, resulting in endless competition for resources and policies, and a zero-sum game of involution. Industrial homogenization and involution of competition may be the biggest problems facing local investment.
Nowadays, the way of thinking has changed.
In February this year, Hunan launched policies and measures to further strengthen investment promotion, and an important change is to promote the transformation of the fishing investment model to the platform investment promotion model to attract investment with incentives and subsidies. In June, Guangzhou issued the "20 Articles for Investment Promotion", which is regarded as a major innovation in Guangzhou's urban investment promotion, one of which is to coordinate policy coordination and strictly prohibit "policy price comparison" in various districts; In the same month, Shanghai also issued the "Twenty Items of the List of Rectification Tasks for Investment Promotion in Shanghai", requiring the immediate clean-up of industrial support policies linked to taxation and a comprehensive ban on "preferential tax policies" for investment promotion. With the official implementation of the "Regulations" in August, the traditional local investment promotion model has been completely stopped, and the abolition of investment promotion offices in various places is only one of the manifestations.
The reporter of "Daily Economic News" learned that at a meeting held in a central city this year, some municipal leaders directly proposed that the traditional investment promotion model with lower factor costs is unsustainable, but at the same time, the adjustment and upgrading of industrial structure, innovation and entrepreneurship, technological upgrading, production expansion and other aspects of financing demand continue to increase, all need to play the "fund" card locally, leverage capital with funds, introduce projects with capital, and cultivate industries.
"Fund investment" is being pinned on by various places.
Li Li (pseudonym) works in a well-known market-oriented VC, and the team he leads has long provided investment attraction, landing empowerment and other services for many local governments, and also has the most direct perception of changes in local investment.
In his view, the essence of fund investment is to attract investment through equity investment tools. "It was originally 'land finance', and now it is called 'equity finance', and in the context of equity finance, fund investment is on the road to the ascendant. Especially after the implementation of the new investment promotion policy, the fund investment will be more vigorous, and this tool will be used more frequently. ”
From attracting a project to building an ecosystem
Compared with the traditional investment promotion method, what can fund investment do and what are the advantages?
Li Li believes that the fund investment model of investment substitution is not only compliant and sustainable, but also can achieve a win-win situation for all parties. Specifically, local state-owned assets have a strong willingness and ability to contribute, but there is still room for improvement in professional investment decisions; At the same time, VC/PE institutions are facing the challenge of fundraising, but they have rich investment experience and keen market insight, and can provide professional investment decision-making support for local state-owned assets. In addition, start-ups have a particularly urgent need for capital and resources in the process of pursuing business expansion, and the way of fund investment can effectively connect the needs and advantages of these three parties, so as to achieve mutual benefit and win-win results.
A classic case that has been repeatedly mentioned is that Hefei once introduced BOE and bet on NIO to cultivate a 100 billion industrial cluster, which attracted more and more cities to start building fund clusters and using funds as leverage to attract and cultivate emerging industries.
Li Li clearly feels that the role of VC/PE institutions is undergoing a transformation from traditional investors to regional resource integrators, "For state-owned LPs, our role is more like that of resource allocators, not only to know the local resource endowment and industrial planning, but also to have a clear grasp of the expansion needs of start-up companies and the focus of local investment promotion policies to achieve accurate docking." In addition to providing funds, it is more important to help enterprises obtain a wide range of resources and support in the attraction, including but not limited to expanding market resources, promoting technical cooperation, integrating upstream and downstream opportunities in the industrial chain, etc., to help enterprises build a long-term development ecosystem in the local area.
In order to better adapt to this role change, Li Li's institution has adjusted its structure, set up full-time positions, and promoted ecological services and industrial investment promotion in a centralized and platform-based manner.
Ding Wenyao, founding partner of Yunqi Capital, obviously agrees with this view. In his view, whether it is the growth of enterprises or the development of the industry, capital is only one of the many driving factors, and there are many other key elements that need to be combined in a scientific way to play the greatest role, and the real value of fund investment is to promote the integration of industrial resources, rather than just attracting enterprises to land.
In other words, the shift from "project thinking" to "chain thinking" is the key.
Ding Wenyao gave an example, Yunqi Capital has an investee company in the field of new materials, and the important reason why the institutions and projects finally chose to land in Henan is that there is a complete new material industry chain here. "From the upstream raw materials to the downstream products, there is just a lack of our portfolio companies. The landing of the enterprise not only opens up the entire industrial chain, but also has the possibility of becoming the main enterprise of the chain in the future, which can complement each other and achieve rapid development in this industrial ecology, which is the most important role of the fund investment. ”
"In the process of selecting regions to attract portfolio companies, we have observed that although some regions can quickly attract enterprises, companies choose to leave soon after making full use of local resources, which shows that relying on short-term incentives is not enough, and it is more important to build a sound industrial chain supporting system." Ding Wenyao said that VC institutions, with their professional insight and extensive resource network, can play an important role in building such an ecosystem, which can not only help enterprises identify and grasp long-term development opportunities in the local area, but also help them integrate into and strengthen the local industrial ecosystem. "We have noticed that the investment assessment in some regions is undergoing such changes, from simply pursuing the number of attracted enterprises to paying more attention to whether the attracted enterprises can take root and develop locally."
In addition, there is a very realistic consideration that as fund investment has become an increasingly commonly used means in the local government, the acquisition of state-owned assets and mergers and acquisitions in the future will also become a potential channel for enterprises to exit, which will provide new possibilities for solving the problem of "difficult exit" in the primary market.
It is difficult to dance while wearing "shackles", and changing your thinking is the key
After talking about the advantages, there are still some problems that need to be faced.
There are two recent cases to share. One is that with the increasing use of fund investment methods, there are now places that have front-loaded investment requirements when recruiting new funds, and the statistical caliber is also narrowing. If a VC goes to a Yangtze River Delta city to raise funds, the condition offered by the other party is that the enterprise must first complete the paid-in registration in the local area before it can be submitted to the fund.
"The prerequisite is that it is so strong, which is equivalent to helping others complete an investment target, and then we will talk about capital contribution. But in case the other party doesn't contribute, we can't do anything about it. Moreover, in the past, the statistics on the return to the landing were wide-caliber, but now it is required to be narrow-caliber, and the headquarters must be located in the local area and have the actual payment landing, which is especially common in the newly established funds. ”
Li Li said that the government's demand for attracting projects has not changed: it prefers projects with large fixed investment amounts, and favors manufacturing enterprises or specialized and new "little giant" enterprises. "Now there are more and more places that want to use funds to attract investment, but the attraction standards have not been lowered, and there are actually comparisons between funds and funds, GPs and GPs, which in turn will force the transformation of institutions and the survival of the fittest."
Another example is that of an AI company from Beijing, which had recently planned to move its headquarters to a second-tier city for comprehensive considerations. Seeing that it was already a sure thing, it finally gave up because the local state-owned assets insisted on signing a VAM agreement and had a disagreement with the founder.
Since the beginning of this year, repurchase and VAM have been one of the lingering topics in the primary market. As more and more cities take action in terms of "fault tolerance", the scale of loss tolerance for various investment funds is clarified and improved, and the exploration of fault tolerance mechanism is also in full swing. It is foreseeable that in the future, fund merchants will be used more and more frequently, how to balance risks and returns, and how to define the responsibilities of government decision-making departments, trustee management agencies and fund management institutions, will also become urgent problems to be solved.
In addition, in the view of many market-oriented institutions, there are some natural shortcomings in fund investment through state-owned capital investment platforms, such as the state-owned assets platform is limited by many factors such as lack of manpower, and its ability to mine projects, due diligence, investment and investment decisions is weaker than that of market-oriented institutions. However, at the same time, as many state-owned platforms are increasing direct investment, the valuation of projects has been invisibly inflated and the market has been squeezed.
"When state-owned assets do direct investment, in order to introduce projects, they often do not care too much about valuation issues, which may lead to the dispersion of limited capital resources, we still recommend that long-term capital represented by government funds should not rush to the front line of direct investment, but can be combined with market-oriented or industrial chain resources and rich layout of funds to give full play to their respective advantages." Li Li said frankly.
Ding Wenyao also said that although many places have switched from the original preferential policy to the current fund investment, the investment promotion idea is still stuck in the strange circle of fighting for increments, and the investment promotion team has to go outside to grab projects every year, but the increment cannot be retained. "The most important thing to do now is to change the way of thinking, not to 'new' as an indicator, but to see whether the existing enterprises are developing well. This connotation is completely different, and the corresponding assessment system will also change, so there must be a process. ”
Explore the new model of "fund + investment" linkage, and investment companies will also experience a reshuffle
In addition to fund investment, many regions have also tried to set up investment promotion companies, hoping to implement performance-based compensation management through a more flexible employment mechanism, stimulate the vitality of the investment promotion team, and improve investment efficiency. Previously, Jiaxing City, Zhejiang Province had posted a market-oriented investment promotion report card: 8 counties (cities and districts) in the city have set up market-oriented investment promotion companies, and in 2023, the city's investment promotion companies will hold more than 250 investment promotion activities, obtain 653 effective information, sign 120 projects, and land 50 projects.
Wang Le (pseudonym) works for a merchant company in Shanghai, and the implementation of the "Regulations" once made him feel a little relieved. "In the same city, different regions poach each other and compete for the most preferential policies, and this kind of involution competition is meaningless."
A state-owned VC person revealed to reporters that in order to achieve "precise investment", cities and counties around first-tier cities will even set up investment promotion points in first-tier cities, taking advantage of geographical location to attract enterprises to relocate with half-hour drive, more preferential policies and lower operating costs.
Wang Le believes that the implementation of the new policy has made investment promotion more transparent, forcing all localities to focus on improving their own industrial competitiveness. "If there is no industrial base, any investment is in vain."
In his view, the future investment promotion companies will go through a process of survival of the fittest, and those investment promotion teams that only use the number of visits and the number of enterprises visited as performance indicators are likely to be eliminated in this competition. A company that can truly be responsible for the results is what the market needs and has the value of sustainable existence. With the implementation of the new policy, Wang Le believes that the business model of China Merchants Company also needs to be re-examined and explored, whether it is direct investment promotion activities, or through property and corporate services, China Merchants companies need to find a profit model that adapts to the new policy environment.
The above-mentioned state-owned VC people also believe that although the involution of investment promotion methods will be banned, the KPI of attracting high-quality enterprises will not disappear, "so I think that investment companies and fund investment companies do have opportunities for development." ”
A person from a China Merchants Company told reporters that the linkage mechanism between the fund team and the China Merchants Company is a major trend in the future, and in the face of projects that require funds, the close cooperation between VC/PE and the investment promotion team is the key to promoting the successful landing of enterprises. "VC/PE plays a role in professional judgment in identifying high-quality projects, evaluating corporate value, judging market prospects, etc., while China Merchants has advantages in leveraging local resources and providing administrative support, and this complementary cooperation can give full play to their respective strengths and help enterprises quickly land and adapt in the new environment.
National Business Daily