In 2017, China ushered in a new financial entity known as Asset Investment Corporations (AICs), comprising five key players aligned with the nation’s top five state-owned banks: Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB), and Bank of Communications (BoCom). These institutions, namely ICBC Financial Asset Investment Co., ABC Financial Asset Investment Co., BOC Financial Asset Investment Co., CCB Financial Asset Investment Co., and BoCom Financial Asset Investment Co., collectively boast a staggering registered capital exceeding 103.5 billion yuan, a testament to their robust potential within the financial ecosystem.

The primary mission of the AICs centers around the strategic concept of debt-to-equity swaps, along with equity investments, asset management, and providing financial consulting services

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The debt-to-equity swap mechanism fundamentally serves as a strategy to reduce corporate debt levels while simultaneously bringing in much-needed capitalThis approach is bifurcated into two essential models: the first, “issue shares to repay debt”, allows AICs to inject equity into struggling businesses and use the proceeds specifically for resolving existing debts; the second, “acquire debt and exchange for equity”, permits AICs to take over a company's liabilities for a more favorable conversion into ownership stakes, empowering the firms to better manage their leverage ratios.

As they navigate the landscape of the Chinese economy, these AICs primarily focus on high-quality (or standard) asset swap projects, with an overwhelming majority—over 90% for certain AICs—being concentrated in this areaTheir ongoing endeavors are fueled by the vast customer base and business networks forged by their parent banks, creating a powerful channel for sourcing quality projects nationwide

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Additionally, there is a burgeoning interest in collaborating with other banks and non-bank financial institutions, broadening the scope of their operations further.

Fast forward to 2020, a significant policy shift enabled the AICs to expand their business repertoireThe China Banking and Insurance Regulatory Commission approved these entities to initiate equity investment businesses through their subsidiaries in ShanghaiThis move opened the door for further diversification, and new subsidiaries emerged—ABC Capital, CCB Investment Fund, BOC Capital, ICBC Capital, and BoCom Capital were formed, marking a pivotal moment in the evolution of AICs.

By the end of 2024, a recognizable landscape of pure equity investment funds initiated by AICs began to take shapeResearch conducted by Qianhai Research Center revealed that 50 focused equity funds had been established since 2020, with 31 of them successfully registered, amassing an impressive cumulative scale of 29.369 billion yuan

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This momentum signifies a notable shift as AICs delve into more non-debt-centric investment strategies.

Analyzing different methodologies, AICs have divided their investment operations into three primary modelsThe first involves their subsidiaries autonomously or in conjunction with other investment firms to pool social capital and establish blind pool equity funds—often opting to partner with state-backed investment entities, fostering a supportive ecosystem for venturesThe second model is designed specifically for project-based funding, allowing AICs to foster investments in predefined initiativesThe final approach sees AICs act as limited partners, investing directly in funds managed by other investment firms, thus indirectly participating in equity topics and market-oriented debt-equity conversions.

The venture data showcased an upward trend in AIC investment activity, particularly post-2019, stabilizing at over 100 cases annually and consistently disclosing investment sums past the 20 billion yuan mark

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By 2024, investment vigor soared, marking a historical peak with AICs performing 156 investment cases totaling an astounding 57.604 billion yuanYet, this investment surge slightly obscures the reality that AICs remain primarily focused on traditional debt-to-equity models, with pure equity ventures still in the exploratory phase, indicating that room for growth remains robust.

Delving deeper, let's take a closer look at ICBC Capital—a pioneer within the AIC setEstablished in November 2018 with an investment of 1 billion yuan, ICBC Capital was entrusted with managing debt-equity swap private equity fundsBy March 2019, it was registered as a private equity fund manager with the Asset Management Association of China, later receiving the green light to commence pure equity investment operations in March 2020. The following period saw the launch of China’s first composite market-driven pure equity investment fund in November 2021, setting a precedent for future initiatives.

As of the end of 2024, analyses indicated that ICBC Capital directly managed 14 equity investment funds with approximately 14.77 billion yuan under management

Investments mainly converged in the semiconductor sector, with notable names such as Heda Semiconductor and Jita Semiconductor being among the players receiving backingCollaborative approaches define their investments, often aligning with other AICs or state-owned enterprises, fostering a cooperative investment landscape that enhances synergy and effectiveness.

The latest developments as of September 2024 reflect a significant policy expansion as AICs were empowered to extend their operational geography beyond Shanghai to encompass 18 major citiesNew directives now permit a substantial increase in equity investments to represent 10% of their total assetsThis strategic design is expected to unleash an estimated 35 billion yuan into the equity investment realm, potentially magnifying market dynamics significantly.

As partnerships flourished across the 18 cities with a total cooperative intention exceeding 420 billion yuan, new equity investment funds mounted to 31 through expanded AIC activities