Plans to re­im­burse in­vestors’ losses

China Daily (Hong Kong) - - YOUTH -

Shang­hai sur­prised en­trepreneurs when it is­sued a bold pledge to in­vestors last Fe­bru­ary. Sev­eral govern­ment de­part­ments is­sued a joint doc­u­ment promis­ing to re­pay up to 60 per­cent of the losses, or up to 6 mil­lion yuan ($880,000), in­curred by any com­pany on in­vest­ments in Shang­hai-based tech­nol­ogy star­tups.

The move is part of the city’s plan to be­come one of the coun­try’s main in­no­va­tion cen­ters.

Sev­eral de­part­ments of Guang­dong’s pro­vin­cial govern­ment is­sued sim­i­lar guide­lines this year. They took ef­fect in April.

The moves have raised eye­brows na­tion­wide, with some peo­ple cit­ing con­cern about waste­ful spend­ing.

Sup­port­ers praise of­fi­cials’ de­ter­mi­na­tion to nur­ture tech star­tups. Skep­tics ask if public funds may be mis­han­dled and if tax­pay­ers may be forced to re­im­burse pri­vate in­vestors’ huge losses. Some ques­tion the ca­pac­ity to de­tect fraud­u­lent in­vest­ment schemes aimed at dup­ing the lo­cal

ex­am­ines an ex­hibit at a cross-Straits en­trepreneurs fo­rum in Xi­a­men, Fu­jian prov­ince.

gov­ern­ments to get com­pen­sa­tion.

Should govern­ment com­pen­sa­tion be of­fered to en­cour­age in­vest­ment in tech­nol­ogy?

It’s in­ap­pro­pri­ate for the govern­ment to use tax­payer money to cover pri­vate in­vestors’ losses. In­vestors — not tax­pay­ers — should be re­spon­si­ble for their own suc­cesses or fail­ures.

The very def­i­ni­tion of “ven­ture cap­i­tal­ism” in­di­cates that in­vest­ments in seed com­pa­nies or star­tups are risky. Shang­hai’s and Guang­dong’s gov­ern­ments will not at­tract real ven­ture cap­i­tal­ists by of­fer­ing to com­pen­sate their losses.

XIN­HUA

A visi­tor

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