Focusing on the Financial 'Twelfth Five-Year' Plan: Promoting Private Equity Development in Five Aspects

　　On September 17, the "Twelfth Five-Year Plan" for the Development and Reform of the Financial Industry (hereinafter referred to as the "Plan"), jointly compiled by the People's Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission, and the State Administration of Foreign Exchange, was officially released. The release of this Plan sets forth the guiding ideology, main objectives, and policy measures for the development and reform of the financial industry during the Twelfth Five-Year Plan period. From seven aspects: improving financial regulation, optimizing the organizational system, building financial markets, deepening financial reform, expanding opening to the outside world, maintaining financial stability, and strengthening infrastructure, it clarifies the key tasks for the development and reform of the financial industry during the Twelfth Five-Year Plan period.
　　Focusing on this Plan, during the Twelfth Five-Year Plan period, China's financial industry will further deepen reforms in many areas, including interest rate marketization, the formation of the RMB exchange rate mechanism, foreign exchange management, and capital market construction. From the perspective of the VC/PE industry, there will also be the following five positive aspects.
　　I. Promoting Securities Institutions to Undertake Asset Management Business and Gradually Expanding the Team of Institutional Investors
　　The Twelfth Five-Year Plan for the Financial Industry points out that in the future, the government will vigorously develop asset management institutions and expand the team of diversified institutional investors. Promote the healthy development of venture capital and equity investment institutions, and regulate the development of private equity fund institutions. Encourage financial institutions such as securities companies and fund management companies to continuously expand their asset management business, and study the timely promotion of futures companies to conduct asset management business. Study relaxing the business scope of public fund management institutions. Continue to promote the participation of long-term funds such as social security funds and enterprise annuities in the capital market. With the further promotion of the financial "Twelfth Five-Year Plan", securities companies, public funds, futures companies and other traditional financial institutions "testing the waters" in private equity investment business will show accelerated signs. Traditional financial institutions have good brand awareness, extensive business networks, and good project reserves. With policy permission, participating in private equity investment business can achieve business diversification, disperse investment risks, improve capital management efficiency, and accumulate strength for improving their own performance growth. During the Twelfth Five-Year Plan period, team building and reasonable asset allocation during the transformation process will become important issues facing these traditional financial institutions. On the road to gradually becoming mature private equity investment institutions, traditional financial institutions need to build their own investment teams, establish market-oriented operation and incentive mechanisms, and coordinate the conflict of interests between traditional business and equity investment business, attracting more large institutional investors with long-term funds to join.
　　II. Encourage Insurance Institutions to Innovate and Gradually Expand the Scope of Insurance Investment
　　The financial "Twelfth Five-Year Plan" encourages innovation in asset management products and steadily expands insurance fund investment in real estate and unlisted equity. Support insurance funds to broaden investment channels under the premise of controllable risks, and invest in insurance companies, non-insurance financial companies, and equity in enterprises related to insurance business such as pension, medical care, and automobile services in accordance with regulations.
　　Overall, in the early stage of the Twelfth Five-Year Plan, the regulatory restrictions on insurance companies' investment in equity and real estate have been significantly relaxed, and insurance companies have more autonomy. However, the policy standards for insurance companies as LPs screening management institutions are still high, such as the registered capital of the management institution is not less than 100 million yuan, and the managed asset balance is not less than 3 billion yuan. At present, there are not many institutions that meet the standards. Due to the large amount of investable capital of insurance funds, as insurance further tries out equity investment, the policy level will gradually relax the restrictions on insurance funds during the Twelfth Five-Year Plan period.
　　III. Increase the Proportion of Direct Financing and Expand Financing Channels for Small and Micro Enterprises
　　This Plan clearly quantifies the indicators, planning to increase the proportion of direct financing of non-financial enterprises in the total social financing scale to more than 15% by the end of the Twelfth Five-Year Plan period. During the Twelfth Five-Year Plan period, if the proportion of direct financing of non-financial enterprises in the total social financing scale is to be further significantly improved, higher requirements will be put forward on strengthening the construction of a multi-tiered capital market system, actively developing the bond market and promoting bond product innovation, and promoting the healthy development of venture capital and equity investment.
　　In addition, this Plan proposes to focus on solving the difficulties of financing for small and micro enterprises. Improve the capital market system, increase the support of the small and medium-sized enterprise board, the growth enterprise market, and the over-the-counter market for small and micro enterprises, encourage venture capital institutions and equity investment institutions to invest in small and micro enterprises, develop financing tools such as small and medium-sized enterprise collective bonds and small and medium-sized enterprise private bonds, and expand financing channels. Venture capital and equity investment can effectively fill the common funding gap of small and micro technology enterprises, provide financial support for small and micro enterprises with innovative technologies, effectively help the industrialization of scientific and technological innovation achievements, promote technological and model innovation, and make significant contributions to increasing employment opportunities, increasing residents' income, and improving people's living standards.
　　IV. Improve the Multi-tiered Capital Market Construction and Promote the Standardized Development of Corporate Listing Financing Activities
　　The Plan points out that it is necessary to regulate the development of the main board and the small and medium-sized enterprise board markets, support small and medium-sized enterprises to use the capital market to grow and develop; promote the construction of the growth enterprise market, improve the operation quality and efficiency, and support the development of the innovation-driven economy; expand the pilot program of the over-the-counter equity transfer system, and accelerate the construction of a nationwide unified regulatory over-the-counter market; explore the establishment of an international board market. During the Twelfth Five-Year Plan period, China's multi-tiered capital market, composed of the main board, the small and medium-sized enterprise board, the growth enterprise market, the New Third Board, and the international board, will achieve rapid development under the guidance of the Plan.
　　In addition to requiring efforts to improve the construction of a multi-tiered capital market system, the Plan clearly proposes to improve the market exit mechanism and continue to deepen the marketization reform of the stock issuance system in terms of regulating the development of the capital market. On the one hand, the improvement of the delisting mechanism and the deepening of the reform of the new share issuance system will establish a mechanism of survival of the fittest in the capital market, improve the quality of listed companies, and on the other hand, the reform of the stock issuance system will curb many problems in new share issuance, such as high price-earnings ratio, high stock price, high over-subscription, high-level resignation, performance decline, and PE corruption, providing a healthy capital market environment for listed companies and investors.
　　V. Encourage and Guide Private Capital to Enter the Financial Services Sector, and Financial Institutions and Private Capital Are Expected to Achieve a Win-Win Situation
　　The Plan clearly states that it will encourage and guide private capital to participate in the restructuring and capital increase and expansion of financial institutions such as banks, securities, and insurance; support private capital to participate in the establishment of new rural financial institutions such as village and township banks, loan companies, and rural mutual aid societies, and micro-loan companies. This provision can be regarded as a signal that the regulatory authorities will further relax the entry of private capital into the financial sector, and the development and reform of the financial industry during the Twelfth Five-Year Plan period will give full play to the advantages of private capital.
　　Private capital's participation in the restructuring and capital increase and expansion of financial institutions will help improve the corporate governance structure of banks and other financial institutions and optimize the equity structure of financial institutions; private capital's participation in the establishment of village and township banks, loan companies, and rural mutual aid societies will help such small financial institutions broaden their refinancing channels and promote their own reform and development; private capital's entry into the financial services sector will enhance financial services for small and micro enterprises and "three rural areas", broaden corporate financing channels, and optimize the local financial ecological environment; relaxing the entry of private capital into the financial services sector will effectively unclog private investment channels and improve the ability of private funds to transform into industrial capital.