Exclusive interview with Xie Zhaohuang of Shanghai Guozhi Technology Innovation Collaborative Development Research Institute: From "One-Size-Fits-All" to "Moderate Relaxation" Shanghai State-Owned Capital Funds Don't Have to Be "Good Kids"

On April 7th, the Shanghai State-owned Assets Supervision and Administration Commission issued the “Guiding Opinions on Further Promoting the High-Quality Development of Private Equity Investment Funds Supervised by the Shanghai SASAC” (hereinafter referred to as the “Guiding Opinions”), which formulates 16 measures from three aspects: strengthening guidance, enhancing capabilities, and optimizing mechanisms, to promote state-owned capital to become long-term, patient, and strategic capital serving industrial development.

Xie Zhaohuang, Executive Dean of the Shanghai Guozhi Science and Technology Innovation Collaborative Development Research Institute and Co-Secretary General of the 100-Person Science and Technology Innovation Investment Forum, told Securities Times reporters that the “Guiding Opinions” are not a patchwork of institutional adjustments, but a systematic “improvement” reflecting the core requirements of high-quality development.

“The core of the ‘Guiding Opinions’ is loosening restrictions—untying the hands that are bound, including streamlining processes, easing exit restrictions, relaxing incentives, and loosening assessments. Shanghai state-owned fund can no longer be the ‘good kid’.” Xie Zhaohuang said, “Moreover, the ‘16 measures’ are not directional documents but operational manuals, with each item having specific implementation paths: who does what, what to do, and what standards to meet.”

Xie Zhaohuang pointed out that managers of Shanghai state-owned funds need to leverage institutional improvements to continuously enhance their capabilities, gradually reaching top-tier levels nationwide in six areas: first-class project investment ability, first-class industry research ability, first-class industry chain integration ability, first-class ecosystem building ability, first-class value creation ability, and first-class operational management ability.

“Only by improving fund management capabilities from these six dimensions can we meet the core requirements of the ‘Guiding Opinions’: cultivating management teams with deep professional expertise and global vision, focusing on enhancing the lead investment and pricing ability of state-owned funds, improving the full lifecycle operation level of funds, and establishing a sound risk control system.” Xie Zhaohuang said. “Only by striving toward the goal of ‘top-tier nationwide’ in these six areas can Shanghai’s state-owned fund managers truly become world-influential first-class science and technology innovation investment institutions.”

Project Investment Ability:

From ‘Follow-on Investment’ to ‘Lead Investment’ From ‘One-Size-Fits-All’ to ‘Moderate Relaxation’

Xie Zhaohuang said that historically, a common behavioral inertia among state-owned funds in project investment was to follow-on invest rather than lead, because “lead investment” involves pricing, which entails responsibility—if problems arise, accountability falls on the lead investor.

As a result, many state-owned funds instinctively wait for market-leading institutions to lead and set prices first, then follow, which means risks are endorsed by others, but the best timing and terms are often lost in the wait. The deeper cost is that long-term follow-on investors can never truly develop sound investment judgment.

Xie analyzed that the breakthroughs in this dimension within the “Guiding Opinions” involve two key actions: first, explicitly proposing to “enhance lead investment and pricing ability” and “improve the full lifecycle operation level of funds.” This is the first time that Shanghai’s institutional documents formally legitimize “lead investment,” transforming it from a high-risk activity into a encouraged professional skill, emphasizing not just lead investment but also “full lifecycle operation”; second, “for regulatory enterprises initiating the establishment of single-target special funds within their main business scope, the commitment contribution ratio requirements can be appropriately relaxed, supporting regulatory enterprises to simplify internal establishment procedures.” For early-stage and star projects in the science and technology sector, moderate relaxation of contribution ratios within their main business scope is itself a demonstration of investment capability.

The “Guiding Opinions” also state that “for those that need to nominate members of the investment decision committee, regulatory enterprises should nominate personnel capable of fulfilling their duties and helping improve investment decision-making levels, and support their independent expression of investment decisions within the scope of authorization.” Xie explained that this clearly requires the original one-size-fits-all “institutional voting” to gradually evolve into “individual voting,” where professionals within the scope of authorization express “expert” decisions—an effective demonstration of investment ability.

Industry Research Ability:

From ‘Financial Logic Dominance’ to ‘Industry Perspective-Driven’

The long-standing structural flaw is the disconnect between the investment logic of state-owned funds and industry logic. Xie Zhaohuang said that the valuation logic used by financial investors is still applicable in mature sectors, but it completely fails in early-stage projects in the science and technology innovation field, which lack traditional financial indicators. Instead, they rely on judgments about technological routes, understanding of industry ecosystems, and key positioning. Who understands this sector? Can this route be successfully navigated? Is this company’s position in the industry chain irreplaceable? Financial models cannot answer these questions; only industry research capabilities can.

In Xie’s view, the support for industry research ability in the “Guiding Opinions” is reflected in three aspects: first, proposing to “follow the industry characteristics of private equity funds—long cycle, high risk, and human-centered industry features.” This means private equity fund managers must “face difficulties head-on” and use an industry perspective to mitigate risks, requiring Shanghai’s fund managers to strengthen industry research.

Second, it explicitly encourages “leading enterprises to establish corporate venture capital funds (CVC funds), and to layout incubation of science and technology projects around innovation chains.” The underlying logic of CVC is precisely “making investment decisions from an industry perspective.” The formal opening of CVC within the state-owned system provides a dedicated institutional channel for transforming industry research capabilities into investment judgments. The “Guiding Opinions” also encourage funds to introduce industry experts as members of the investment decision committee as needed, which means providing reference and insights from an industry and sector research perspective—“climbing the ladder with the help of a ladder” reflects the core demand for top-tier industry research capabilities.

Third, the “Guiding Opinions” mention in lead investment and pricing that “attention should be paid to key indicators such as core team capability, R&D investment intensity, technological originality and breakthrough, patent quality, strategic position in the industry chain, and growth expectations, to reasonably determine investment prices.” This requires independent judgment on R&D investment, technological originality, and strategic position in the industry chain, demanding deep “industry research” expertise from fund managers.

Industry Chain Integration Ability:

From ‘Improving State-Owned Fund Products’ to ‘Optimizing State-Owned Fund Layouts’

In recent years, most state-owned enterprises emphasize their ability to provide a full lifecycle product matrix—from “angel, Series A, Series B to S funds, strategic placement funds, and M&A funds.” Most explanations are from the perspective of fund products, considering investment stages and profit mechanisms, focusing more on points and lines.

Xie Zhaohuang said that the “Guiding Opinions” mention “improving the layout of state-owned funds,” which is a significant difference from just improving product offerings. The key to layout is first-class industry chain integration ability, centered on proactive involvement in strengthening, supplementing, and building industry chains. This requires funds to have a higher vantage point and a better understanding of “integration” and “planning.”

The “Guiding Opinions” equip the industry chain integration with a toolbox, explicitly encouraging the establishment of M&A funds, S funds, and more importantly, “optimizing valuation adjustment mechanisms.” It states that when regulatory enterprises transfer fund shares or transfer equity of invested companies in a corporate fund, they can rely on valuation reports issued by third-party agencies based on project conditions, comparable market cases, and asset liquidity to determine appropriate adjustment ranges.

Xie said this addresses the most difficult challenge in state-owned M&A and integration—previously, lowering prices risked accusations of state asset loss, while raising prices risked losing deal value, creating a dilemma. Now, with a mechanism underpinning the process, there is operational space for price adjustments, enabling real movement in integration. “Although profits at certain nodes may seem slightly less, the overall goal is better integration and maximizing benefits for social impact and breakthroughs in key technologies.”

Ecosystem Building Ability:

From ‘Superficial Empowerment’ to ‘Institutional Empowerment’

State-owned funds inherently possess scarce ecosystem resources, including industry scenario resources and upstream-downstream connection capabilities. In the past, post-investment empowerment by funds was often superficial, mainly due to institutional gaps: where are the boundaries of empowerment? How to define them? Who is responsible? If disputes arise, who bears responsibility? Without institutional backing, managers naturally tend to avoid empowerment actions.

Xie Zhaohuang said that the response in the “Guiding Opinions” is to elevate empowerment from an “optional” activity to an “institutional arrangement,” explicitly proposing to “optimize the post-investment empowerment system and establish a city-district coordinated empowerment network.” This means empowerment now has a formal institutional basis, no longer a vague optional action, and extends the scope of empowerment resources from funds themselves to the entire Shanghai municipal and district-level state-owned asset system. Funds are no longer isolated financial investors but can truly connect to Shanghai’s state-owned ecosystem as platforms for industrial empowerment.

The “Guiding Opinions” also encourage capable regulatory enterprises to establish professional post-investment empowerment agencies, creating a comprehensive service system covering “investment + financing, industry + ecology, technology + transformation, talent + support, information + transfer,” forming sustainable business models.

Value Creation Ability:

From ‘Short-Term Performance Evaluation’ to ‘Long-Term Incentives’

Historically, evaluations of funds focused on annual financial performance, looking at individual project profits and losses. This logic is somewhat applicable in secondary markets but completely mismatched in primary market science and technology investments. An early-stage tech project may take seven to ten years from investment to exit, with no financial returns visible in the first or second year. The short-term evaluation mechanism discourages managers from early, small, or long-technology-route investments, as such investments would harm their annual assessments.

Xie Zhaohuang believes that the “Guiding Opinions” fundamentally reconstructs the evaluation logic, explicitly implementing a “combination of annual and long-term assessments,” focusing on the overall performance of the investment portfolio, not on individual projects or single-year profits and losses. It also sets differentiated financial and non-financial indicators based on fund type and operational stage.

“Supporting mechanisms include employee co-investment and excess return sharing arrangements, truly linking the long-term interests of management teams with the long-term returns of the fund, rather than short-term KPIs.” Xie said.

The “Guiding Opinions” support fund management teams to obtain co-investment returns and excess returns through holding shares in employee co-investment platforms (SLP) or general partner (GP) shares of the fund.

Operational Management Ability:

From ‘Compliance Burden’ to ‘Professional Control’

The core pain point in the operation and management of funds is the “blurred boundaries of rights and responsibilities.” The boundaries among investors, managers, and regulators are unclear, leading managers to handle both investment judgments and a large amount of administrative tasks, which dilutes their professional capacity. Coupled with complex approval processes at each stage of fund establishment, fundraising, investment, and exit, the result is that skilled investors spend most of their time on paperwork and approvals.

Xie Zhaohuang said that the reforms in “Guiding Opinions” focus on three key actions: first, “clarify the rights and responsibilities boundaries among investors, managers, and regulators,” which is foundational; only with clear boundaries can roles be well-defined; second, “implement tiered and classified regulation,” applying different rules to strategic funds, industry funds, and financial funds, rather than a one-size-fits-all approach, thereby reducing compliance costs; third, “promote professional control,” which is an important upgrade to decision-making mechanisms.

Xie also noted that if the Shanghai SASAC’s 2024 “Regulations on the Management of Private Equity Investment Funds Managed by SASAC-Registered Enterprises” address “how to manage well,” then the 2026 “Guiding Opinions” answer a more fundamental question: what kind of institution should state-owned funds become? That is, to develop into world-class, professionally capable science and technology investment institutions, not just financial tools operated through administrative procedures. With loosening restrictions, the previous reasons for hesitation no longer hold. Institutional support is in place; the next challenge is whether state-owned fund institutions can truly transform institutional space into capacity building and how to become a globally leading science and technology innovation investment organization.