This year’s “State Council Document No. 1” focuses on attracting investment in funds.

Recently, the National Development and Reform Commission issued a document.

Restrictions on reinvestment ratios have been eased, a negative list has been introduced, and blind investment is strictly prohibited.

In the past, many investment institutions set up “investment promotion offices.”

They had to balance financial returns with meeting reinvestment quotas.

When caught in this dilemma, three core conflicts became even more apparent:

Forced investment within restricted regions, an inability to find suitable projects, and companies arriving only to find they cannot establish operations.

In reality, government investment funds are no longer “bargaining chips” for investment promotion.

Instead, the focus has shifted from merely pursuing capital inflows to placing greater emphasis on industrial cultivation and upgrading.

01 Forced Local Investment Due to Regional Restrictions

Six months later, senior officials have once again addressed government investment funds.

These two documents emphasize “precise positioning, scientific planning, and strict supervision.”

In past practice, government-guided funds have primarily focused their requirements on GPs regarding reinvestment.

This often puts GPs in a passive position, leaving them with little control over whom they invest in.

Requirements for reinvestment are invariably accompanied by minimum percentage thresholds and geographical constraints.

An investment director in South China highlighted this widespread phenomenon.

Currently, investment promotion departments are pushing many projects, 80% of which do not meet investment standards—either the technology is already outdated or the business model is unclear.

Yet GPs have no choice but to proceed, forced to invest in subpar local projects, with capital continuously being consumed in an inefficient cycle.

What’s even more subtle is that even hard-tech projects that fail to meet investment thresholds are required to be heavily “packaged” by GPs to pass internal approvals.

This practice of “meeting numerical targets” may appear to fulfill performance metrics, but in reality, it erodes the fund’s long-term value.

When geographical constraints are prioritized over project quality, it amounts to substituting administrative thinking for market judgment.

This not only leads to misallocation and waste of resources but also creates a “Gresham’s law” effect of adverse selection.

The essence of investment decision-making lies in in-depth research into industries and companies, guided by clear direction and boundaries.

If administrative constraints are used to shackle investment logic, the resulting disruption will ultimately lead to the loss of high-quality projects.

02 Neither High Nor Low: Struggling to Find Suitable Projects

“The longer I’ve been using government funds, the more I feel like a ‘director of an investment promotion office,’”

A partner at a Beijing-based venture capital firm boldly articulated this dilemma.

Local government-guided funds often find themselves in a bind when selecting projects.

They look down on ordinary projects, yet high-quality projects never come their way.

For investment firms, unless they have previously invested in the region or have a few projects in the pipeline, it is difficult to be selected by some local government-guided funds.

Conversely, conditions vary across regions, and the investment targets set by governments often do not align with local realities.

This year, a document from the National Development and Reform Commission also mentioned the need to focus on local resource endowments and reject indiscriminate investment.

Many local government-guided funds are vying to attract industries such as artificial intelligence, biopharmaceuticals, and high-end equipment manufacturing.

When competing for projects, it is common for multiple funds to target the same high-quality company simultaneously, driving up the project’s valuation through a bidding war.

In reality, given the varying local resource endowments, these “high-tech, cutting-edge” sectors often do not align with the local industrial base, leaving GPs unable to find suitable projects.

Currently, nearly 90% of government demands center on making investments as quickly as possible, with some even setting performance targets such as “a specific investment amount must be made this year.”

This directly impacts the efficiency of fund utilization, raising concerns about whether the money is truly being invested in innovative projects rather than sitting idle in the fund.

If local governments simply chase trends by selecting a popular sector without possessing the necessary resource endowments, they will struggle to achieve the intended results of attracting investment through the fund.

03 Projects Are Brought In, but Implementation Capacity Lags

“You bring a project there, but there’s no one to receive you—how can you even talk about implementation?”

A GP’s complaint highlights the various challenges in the implementation phase.

Some say that it’s already quite an achievement for investment firms to bring projects to the table.

As for whether the project can actually be implemented, that’s the local government’s job.

When a company’s qualifications are in order and it aligns with the city’s investment priorities, the inability to secure a site is usually due to insufficient local capacity to accommodate it.

Even after the relaxation of reinvestment restrictions, the disconnect between project attraction and local implementation capabilities persists.

Investment firms bring high-quality projects to the door, yet local governments often fall short in service efficiency, supporting infrastructure, and interdepartmental coordination.

From the enterprise’s perspective, successful implementation depends not only on funding but also on its own strategic planning and industrial synergy.

Additionally, there may be mismatches in priorities and requirements between the project team and the local government.

For example, processes may be too slow, making it difficult to meet project financing timelines or provide the necessary talent support.

The process from attracting investment to actual implementation is inherently a multi-departmental, long-term decision-making process.

This involves the participation of core departments such as science and technology, finance, planning, drug regulation, and environmental protection.

When a biopharmaceutical company sets up operations in a certain area, the investment promotion department pushes for progress, the drug regulatory department awaits documentation, and the environmental protection department conducts assessments.

When approval efficiency fails to keep pace with the financing window, various supporting measures become empty promises, and even the highest-quality projects will be lost.

Faced with these implementation challenges, some investment firms have established “investment promotion offices.”

These offices serve to align with the government’s investment promotion needs while coordinating with internal investors to ensure project implementation.

Essentially, this is about bridging the gap between “attracting projects” and “facilitating implementation.”

Now that restrictions on reinvestment have been eased, local governments should focus their efforts on developing robust implementation plans and improving investment promotion services.

Only through the ability to deliver on promises, the capacity to break down barriers through collaboration, and the capability to provide tailored support can every project be successfully implemented.

With the signal of the relaxation of reinvestment restrictions, fund-led investment promotion is no longer an extension of administrative power but a return to industrial cultivation.

We need fewer regionally constrained, passive investments; less blind chasing of trends that leads to project mismatches; and fewer barriers and gaps in project implementation.

Instead, fund-based investment promotion should “follow market logic, align with resource endowments, and provide coordinated services for projects.”