Original Title: Policy Interpretation of the “Administrative Measures for the Jing’an District Government Industrial Guidance Fund (Trial)”

In accordance with the guiding principles of the Shanghai Municipal Government’s “Guiding Opinions on Further Strengthening the Operation and Management of Municipal Government Investment Funds” (Shanghai Finance Enterprise [2016] No. 118), the following is an interpretation of the relevant policies regarding the “Jing’an District Government Industrial Guidance Fund Management Measures (Trial)” (hereinafter referred to as the “Management Measures”):

I. Background of the "Management Measures"

To further enhance the efficiency of fiscal fund utilization, leverage the role of fiscal funds, standardize the management of government investment funds, and promote their sustained and healthy operation, in 2015, the Ministry of Finance successively issued the “Interim Measures for the Administration of Government Investment Funds” (Cai Yu [2015] No. 210) and the “Guiding Opinions on Injecting Fiscal Funds into Government Investment Funds to Support Industrial Development” (Cai Jian [2015] No. 1062).which clearly defined the procedures for establishing government investment funds set up by governments at all levels through budgetary allocations, the sectors for fund establishment, the organizational forms of government investment funds, their operation and risk control, fund termination and exit, budget management, and supervision and management. These documents also required local governments to formulate implementation rules for their respective regions based on actual conditions.To standardize the establishment and operation of the Jing’an District Government Industrial Guidance Fund (hereinafter referred to as the “Guidance Fund”), the Jing’an District Finance Bureau, in conjunction with the Jing’an District Science and Technology Commission (i.e., the “Office of the Jing’an District Government Industrial Guidance Fund Management Committee”), has drafted the “Management Measures” for the Guidance Fund.

II. Main Features and Content

The "Management Measures" consist of 7 chapters and 30 articles, divided into "General Provisions," "Organizational Structure and Responsibilities," "Operating Principles and Models," "Risk Control and Management," "Fund Exit," "Supervision and Evaluation," and "Supplementary Provisions."

The "Management Measures" set forth detailed regulations for the first time regarding the establishment, operation, exit, risk control, and organizational structure of the Guidance Fund. They clearly define the four principles governing the fund’s operation: "government guidance, market-driven operation, scientific decision-making, and risk prevention." The District Finance Bureau, acting on behalf of the District Government as the government investor, will direct investments toward key industries in Jing’an District—such as commerce and trade services, financial services, professional services,cultural and creative industries, and information services, as well as emerging fields such as the digital economy, the health sector, and the platform economy. It aims to promote the development of new technologies, business models, and formats—including the internet, cloud computing, big data, blockchain, artificial intelligence, and the Internet of Things—while guiding the digital transformation and quality enhancement of traditional industries to help create new growth points for the regional economy.The "Management Measures" also establish a management system for the Guidance Fund that separates investment decision-making, daily operations, and supervision and management. The Management Committee, the Office of the Management Committee, the Guidance Fund Operation Platform, and the Supervisory Committee shall each perform their respective duties. The Fund shall establish internal risk control systems and define prohibited business activities. It also stipulates the exit methods and timeframes for the Guidance Fund and clarifies that all investors in the invested funds shall distribute returns in accordance with the principle of "shared benefits and shared risks."

III. Key Measures to Strengthen the Management of the Guidance Fund

(1) Clarified the guiding principles of the Guidance Fund: “government guidance, market-driven operations, scientific decision-making, and risk prevention”;

(2) Defined the basic eligibility criteria for investee funds and their fund managers, and established investment conditions for participating in newly established funds or increasing capital in existing funds;

(3) Detailed regulations and requirements have been established for the risk control, termination and exit, and supervision and management of the guiding fund;

(4) Prohibited the guidance fund from promising other investors that their principal will not be lost or guaranteeing a minimum return.

IV. Regarding the Specific Implementation of the “Management Measures”

The drafting and issuance of the “Management Measures” represent a significant initiative by the District Finance Bureau to implement the District Party Committee and District Government’s requirements for optimizing and improving the management of the guidance fund, as well as to innovate fiscal expenditure methods. The Municipal Finance Bureau will collaborate with the Municipal Financial Affairs Office, relevant municipal authorities, and the Office of the Jing’an District Government Industrial Guidance Fund Management Committee to actively interpret and implement the “Management Measures.” All relevant units and the Office of the Jing’an District Government Industrial Guidance Fund Management Committee shall establish and manage the fund in an orderly and compliant manner in accordance with the “Management Measures.”