The Chinese Ministry of Science & Technology (MOST) and the Ministry of Finance (MOF) recently signed an equity investment agreement with six Chinese local VC firms to invest a total of  RMB159mm (US $23.7mm) seed capital into each of the six VC firms. The administrative entity of this project is Technology SMEs Innovation Fund Management Center under MOST.

These six VC firms are Wuhan Huagong Venture Capital Co., Ltd. (HUSTVC), Shanghai Venture Capital Co., Ltd., China-Singapore Suzhou Industrial Park Development Co., Ltd., Jiangsu High-Tech Investment Group,Shandong High-tech Investment Corporation and Hefei Venture Capital Co., Ltd.  The injection of capital to these firms ranges from RMBRMB16mm (US $2.4mm) to RMB55mm (US $8.4mm), which will account for 11.92% to 28.89% equity ownership by the government in these firms. After receiving the seed capital each firm is responsible for setting up a fund to invest exclusively in technology SMEs in their early development stage.

Each VC firm will apply leverage no more than 1:10 and will raise more capital from more investors esp. those non-government entities. It is estimated that, with the leverage, the six firms can provide financing up to RMB1.04billion (US $156mm).

This project is one of Chinese central government’s efforts to stimulate the economy through financing technology.

If you find this article helpful, you may want to read the following articles to learn more about Chinese government's other stimulus programs such as solar energy and infrastructure:

More Details of Stimulus Plan will be Unveiled during China's Congress Meetings in March

China Introduced a Subsidy Program for Solar PV

China's Investment in Infrastructure - Rail Services

Opportunities in China's Infrastructure for 2009 - Waterborne Transport