China to change VC investment rules for banks

The country is reportedly planning to let commercial banks create venture capital units to invest in technology startups.

China’s government has given its approval to a pilot scheme that will allow commercial banks to set up venture capital arms aimed at technology startups, China Money Network reported on Tuesday.

Commercial banks in China are currently banned from investing in non-banking businesses, though some financial institutions circumvent the law by setting up vehicles abroad, inserting debt-to-equity terms into loan deals or appointing VC and private equity firms as proxy shareholders.

One example of a financial services firm relying on offshore vehicles is China Merchants Bank, which provided an undisclosed sum to ride sharing service Didi Kuaidi through such an entity last week.

The government hopes the change of rules will give a boost to the domestic technology sector. The initiative is expected to launch later this year.

- This article first appeared on our sister site Global Corporate Venturing.

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