How effective is Anhui's investment promotion?

Some say that half a high-speed rail car is filled with investors heading to Anhui.

When discussing Anhui, one cannot help but mention Hefei—the “pioneer” of investment promotion nationwide.

Hefei’s investment promotion efforts are hailed by the industry as “a hot knife through butter,” a phrase that has spread throughout the investment promotion circles.

Many investors share this story with a tone that sounds just like parents lecturing their own children:

“Look at other people’s children, then look at you. Look at other governments, then look at yours.”

Hefei’s investment promotion is like “digging a well”—to find the “source of investment,” they engage with companies on the same wavelength.

Behind the “Hefei Model” lie three core principles that local governments across the country should take note of.

01 Back then, it was still NIO in Shanghai

Any discussion of Hefei inevitably involves NIO.

Searching for NIO on the websites of the Anhui Provincial and Hefei Municipal governments reveals the earliest mention dating back to 2017.

In one article, NIO was mentioned in just a single sentence—and even then, it was in connection with Jianghuai Automobile:

“JAC Motors and Shanghai NIO are advancing internet-based collaborative manufacturing, creating a classic case study of internet-driven automotive manufacturing in China. Their first vehicle is expected to hit the market within the year.”

Back then, NIO was still Shanghai NIO.

By 2018, the Hefei High-Tech Zone organized local enterprises to visit NIO, though the visit was still largely a courtesy call.

After all, JAC Motors was Anhui’s “local company,” while NIO was still “from Shanghai.”

But by 2020, when Hefei mentioned NIO, it had taken on the tone of an “official announcement.”

According to information from Tianyancha:

In June 2020, NIO’s investor structure underwent a change.

In February 2021, NIO officially transitioned from a “Shanghai-based” company to a “Hefei-based” one in the commercial registry.

To use an imperfect analogy, the “marriage” was officially announced in February 2020; the dowry had been given quite some time ago, and after a year of waiting, the bride finally arrived and settled down.

To attract investment, Hefei’s 10 billion yuan “dowry” demonstrated genuine sincerity—and entailed significant risk.

Investment is always an endeavor where risk and reward go hand in hand. From today’s perspective, the investment in NIO has been a success.

Speaking of which, I’m reminded of Secretary Yu’s words: “We can’t just stand by and watch a company drown; the government should jump in and swim alongside everyone.”

In recent years, many regions have looked up to this kind of forward-thinking vision. While admirable, the question of whether such “risks” are worth emulating by local governments has always remained a point of contention.

However, what cannot be overlooked is the professional investment promotion capabilities of Hefei’s officials.

02 Looking at the Present: Acting as an Industrial Chain Advisor

“We only need to discuss a project once to know whether it has potential and whether the company is likely to establish operations here.”

This is the investment experience that has become ingrained in the mindset of Hefei’s investment promotion team.

Previously, when accompanying Hefei investment promotion officials on due diligence visits to companies, the detailed and thorough industrial training provided by local investment promotion staff seemed to have become the norm.

Before the company had even asked why they should consider investing here, the Hefei investment promotion specialist pointed out, “You already have suppliers here.”

The company’s representative noted that while they had shortlisted several potential cities, Hefei was the only one where discussions focused squarely on the project itself and the industrial chain—specifically: how to invest, the investment amount, post-investment plans, and operational strategies.

In contrast, other cities failed to present detailed investment proposals or agreements, offering almost identical investment policies. In fact, if Hefei offered N policies, they would counter with N+1.

Whether it’s fund management firms or government-run industrial parks, even frontline investment promotion staff are intimately familiar with Hefei’s industrial layout, planning, and the companies within its industrial chain.

Upon further reflection, investment managers resemble seasoned investment promotion officials, while investment promotion officials resemble industrial investment managers with years of experience. This easily explains why, when it comes to investment promotion, Hefei’s efforts are more effective.

At the Hefei Investment Promotion Bureau, every staff member—whether a permanent employee or a seconded official—is tasked with one mission: to thoroughly research a specific industry.

The *Hefei 2023 Key Industry Investment Promotion Guide* spans 250 pages. This guide was not compiled by a professional agency but by staff members of the Investment Promotion Bureau, covering 16 strategic emerging industrial chains that Hefei is prioritizing for development.

Within this guide, the integrated circuit sector alone is further subdivided into four industries, including automotive semiconductors. It provides detailed analyses of industry trends, market landscapes, and industrial policies, while also presenting comprehensive industry chain maps, lists of target enterprises, and investment matching platforms.

To outsiders, you appear to be an expert; to insiders, you don’t appear to be a novice. As a result, Hefei’s grassroots investment promotion staff are fully capable of serving as “industry chain advisors.”

Just how professional can Hefei’s investment promotion staff be?

Take this example: During a site visit to a company, after inspecting the factory and equipment, an investment officer stated that the project’s investment amount was 38 million yuan.

The company’s representative was shocked upon hearing this, as the actual investment amount was just over 37 million yuan.

In many regions, officials don’t know exactly what kind of projects they’re looking to attract and have limited understanding of the companies themselves. Consequently, they cannot, like Hefei, get straight to the point during a meeting, discuss pain points and needs, and make the other party feel that you have a deep understanding of the industry.

To ensure they are on the same page as companies, everyone in Hefei—from city leaders to ordinary investment promotion staff—thoroughly studies and researches various industry-related information, including industrial investment and financing policies, industry development reports, and IPO prospectuses of listed companies. As a result, even frontline investment promotion staff possess comprehensive knowledge of the entire industrial chain.

03 Please Note: Pitfalls of the Hefei Model

Industrial Investment, Not Venture Capital

Under the “Hefei Model,” investment is aimed at completing the strategic industrial landscape; LCD panels were one of the missing pieces, so Hefei was willing to “spend big” to persuade BOE to relocate there.

Moreover, even before BOE’s arrival, Hefei’s home appliance industry had already reached a substantial scale. Similarly, before NIO settled in Hefei, the city already possessed a talent pool and industrial foundation in the automotive sector.

This model not only drives tax revenue and employment but also roots the industrial value chain locally, making it virtually impossible to relocate in the future.

Looking back now, in 2020, a joint venture—NIO China—was established with NIO, requiring the company to locate its China headquarters, R&D base, and second production facility in Hefei; from 2020 to 2025, total revenue was set to reach 420 billion yuan, with total tax revenue not falling below 7.8 billion yuan.

Additionally, the company was required to complete an IPO within 60 months of receiving the first round of investment, with the listing location subject to approval by all shareholders; furthermore, it was mandated to fully develop a smart electric vehicle industrial cluster in Hefei centered around NIO’s product portfolio.

Capital Exit Mechanism

Through years of exploration and practice, Hefei has established a comprehensive state-owned capital exit mechanism, adhering to the basic principle of “not seeking controlling stakes, exiting promptly once the industry shows positive development, and reinvesting in the next project.”

In this way, while fulfilling its mission of fostering and introducing industrial projects, state-owned capital also achieves preservation and appreciation of value, as well as expansion and strengthening of the enterprise.

For example, in the BOE 6th-generation and 8.5th-generation production line projects, Hefei completed its investment exit through secondary market divestments, generating nearly 20 billion yuan in returns, which were then reinvested into subsequent projects.

In other words, the profits generated from exiting an investment are then used to fund the next NIO or the next BOE.

However, the relationship between the two parties did not end there. BOE continued to contribute to Hefei’s development; by 2017, BOE’s investment in Hefei had exceeded 100 billion yuan, not only funding production lines but also driving the development of Hefei’s smart manufacturing facilities and digital hospitals.

Risk Hedging Awareness

Everyone understands the principle of not putting all your eggs in one basket. While the Hefei municipal government placed a heavy bet, it also invested in multiple players with complementary competitive strengths and signed performance-based agreements to ensure the safety of state-owned assets.

When BOE was first brought in, there were actually two potential paths for the future development of TV screens: one was LCD panels, represented by BOE, and the other was plasma panels.

Consequently, the Hefei municipal government played it safe. It opened its doors to Changhong’s plasma production lines. By betting on both technological paths, the city ensured a comprehensive industrial layout regardless of which technology ultimately prevailed.

In just over a decade, Hefei’s total industrial output value surged from over 100 billion yuan to the trillion-yuan level. Rather than being mere “venture capital,” this was the result of an unwavering commitment to “building the city on industry and strengthening it through industries.”

As Yu Aihua, Secretary of the Hefei Municipal Party Committee, put it: “It’s not ‘gambling’ but ‘striving.’ Gambling means living for today with no tomorrow, while striving means seizing today to win tomorrow.”