CHINA SYSTEM · OPERATING LOGIC
Read the concept through its operating structure
Grants and equity have different cash flows
A grant is fiscal expenditure; a government fund acquires equity or fund interests and seeks return. Establishment, fiscal approval, manager selection, fundraising, investment decision, signing and paid-in capital are distinct.
Funds of funds, sub-funds and direct investment differ
A fund of funds backs sub-funds that invest in companies; some also invest directly. Government may set policy and evaluation, while managers and investment committees usually decide deals.
Local-return rules connect industrial policy and market return
Local-return clauses require sub-funds to invest in a region. Ratio, timing and eligible activities—including relocation, new entities, jobs, tax and follow-on—must be read in the fund agreement.
Patient capital still needs an exit
Patient capital tolerates longer cycles and uncertainty but is not exit-free. Government funds must reconcile fiscal evaluation, local attraction, state-asset preservation and venture failure, with M&A, transfers and secondary exits.
Korean companies should read conditions before headline capital
Korean companies should verify manager authority, RMB/foreign-currency structure, geography, stage, local-return, relocation, preferences, IP/data restrictions and exit. Joint funds require clear capital calls, loss allocation, committee and conflicts.