Bank of China (BOC), a wholly state-owned commercial bank, has officially set up a fund-of-funds (FOF) to invest up to 30 billion yuan ($4.21 billion) in technological innovations in China’s private market.
BOC, which commands a market cap of HK$1.64 trillion ($210.3 billion) as one of the world’s biggest banks, introduced the gigantic FOF to “infuse market resources and patient capital into early-stage, small-scale hard tech startups”, said the bank in a Monday statement.
The Chinese commercial bank said it built the multi-billion-dollar fund in partnership with local governments and industry leaders in China. A wholly-owned fund management subsidiary of BOC serves as the general partner (GP).
The FOF will focus on artificial intelligence (AI), quantum technology, biotech, and other industries “vital to the development of China’s tech innovations”, said the bank.
It plans to actively deploy capital to the country’s startup incubation hubs to help boost key scientific research and invest in entrepreneurial efforts to bring them to market.
The move to launch its FOF came after BOC made the headline in May when it teamed up with another five domestic banks to pour a total of 114 billion yuan ($16 billion) into China’s “Big Fund III”, or the third phase of the National Integrated Circuit Industry Investment Fund.
The commitments saw the six banks obtain a 33.14% stake in this state-level fund, which is China’s largest-ever chip investment vehicle that underlines Beijing’s vows to achieve self-reliance in semiconductors.
Although commercial banks contribute to only a small fraction of private-market fund investments in China, they have grown more active since the Chinese authority issued documents in early 2021 to encourage their fund management subsidiaries to participate in private-market investments.
In the first three quarters of 2023, fund management arms of the country’s five biggest commercial banks invested a total of 16.1 billion yuan ($2.3 billion) in private-market funds as their limited partners (LPs), according to a January 2024 report by Chinese consultancy ZERONE.
BOC Financial Asset Investment committed to five private-market funds between Q1-Q3 2023, the report shows, with its cheques totalling 2.5 billion yuan ($350.9 million).
ICBC Financial Asset Investment, which is affiliated with the Industrial and Commercial Bank of China (ICBC), the world’s biggest bank, was the most deep-pocket commercial bank LP in the country. Its overall commitments in the same period were close to 6.4 billion yuan ($898.4 million).