SHANGHAI International Group is to set up a venture capital firm to offer finance to small and medium enterprises as part of the city’s strategy to support the underfinanced sector.

The investment arm of the Shanghai city government will invest 1 billion yuan (US$156 million), including 500 million yuan of city government revenue, in the new firm, the Shanghai Financial Services Office said yesterday.

It said small businesses backed by the VC will find it easier to obtain loans from banks.

The office said: “Unlike Shanghai’s 300 other VCs, which are mostly profit-oriented, the new firm will act politically in guiding and magnifying investment in SMEs.”

It added that the firm will catalyze increased lending by banks and investment from financial services institutions. It is expected the company will act as a magnet for another 30 billion yuan of investment in SMEs in the next three years.

The establishment of the firm is among a series of measures to boost liquidity for SMEs. Earlier this month, the city government announced 3 billion yuan of subsidies for small business, especially those involved in technology.

By the end of July, the city had approved licenses for 69 small-loan credit companies, and 64 have already started operating.
 

Source:Shanghai Daily