To achieve the transformation and upgrading of the country's manufacturing sector, China has established a massive new fund.
Shareholders in the fund include CRCC, China Tobacco, and the Ministry of Finance which is a dominant investment arm of China Development Bank.
On Thursday, according to the announcement, the fund's registration capital is CNY 147.2 billion, making it more significant than that of the state-owned China Integrated Circuit Industry Investment Fund (CICF) set up in 2014 to stimulate China's chip industry. Some investors of this new fund have previously plowed capital into CICF.
It is reported that the fund will invest in long-term and mature enterprises in the fields of advanced materials, next-generation information technology, and power equipment. Combined with the development path of integrated circuit funds, there may be a number of investments focusing on this frontier in the future.
The upgrade and transformation of manufacturing in urgent as the demand for manufactured products has been shifting to emerging markets. With the productivity rising in Asia and Africa, nearly two billion people are expected to take part in the global consuming class by 2025. In the meantime, the market demand is more diverse and dynamic, consumers with various needs and spending power require manufacturers to offer a higher number of stock-keeping units (SKU) which will push the manufacturers to adopt the flexible manufacturing system (FPS) which can easily adapt to changes in the type and quantity of the product being manufactured.
Apart from that, one of the engines that make China as the top one manufacturing entity is the demographic dividend, however, the dividend has been shrinking in recent years. Under this hazard, keeping high efficiency requires a high level of automation.
To making manufacturing 'smart' needs capital as a strong pipeline. Recently, national-based funds have been attracting people's attention. On 2 November, China's national advanced manufacturing fund phase 2 was initiated; it is set to accelerate the manufacturing industry's upgrading and transformation.
With the uptick in the smart manufacturing market since 2015, the sector has been widely favored by the capital market, with a significant increase in the quantity and scale of financing. In 2016-2018, China's smart manufacturing industry had a strong development momentum and ushered in a financing peak. In 2018, the financing amount reached USD 32.5 billion, with 942 financing cases.
Seemingly, money will accelerate higher growth in the manufacturing industry.