China encourages more VC funding, promises foreign firms equal treatment

A window cleaner works on exterior of a building of a state-run bank in Beijing, China, January 9, 2016. REUTERS/Kim Kyung-Hoon

BEIJING (Reuters) - China plans to grant foreign venture capital investors equal treatment compared to domestic firms, give them better market access and cut red tape, Xinhua news agency reported on Thursday.

State owned companies will also be allowed to set up venture funds and insurance companies will be encouraged to invest in startups, according to a statement carried by Xinhua from China’s cabinet after a meeting led by premier Li Keqiang.

The government will provide tax cuts and improve platforms including over-the-counter markets to enhance direct financing, Xinhua said.

China has one of the most active venture capital industries in the world, with multiple billion dollar startups, or “unicorns”, formed over the last few years.

However, investors often cite a lack policy clarity and unpredictable capital market access, including a volatile initial public offering market, as challenges facing the industry.

The commerce ministry said last week that China would open up more sectors for foreign investment as the country looks to boost its economy, which is growing at the slowest pace in 25 years.

Reporting by Elias Glenn; Editing by Dominic Evans