Hefei 30 Billion for 1 Trillion: The First Year of Equity Finance, Who Can Copy This Assignment
In July 2026, Hefei’s state-owned assets system reaped over 1 trillion RMB in floating gains from the IPO of ChangXin Memory—a return stemming from a cumulative investment of less than 30 billion RMB over the preceding decade. This marks a prominent case of China’s emerging “equity-based fiscal model,” where local governments act as long-term industrial investors rather than relying solely on land sales.
The story traces back to 2016, when Zhu Yiming, founder of Gigadevice and later ChangXin, sought funding for a domestic DRAM chip project amid high risks and intense international competition. Hefei, despite its limited fiscal resources, committed to the venture. Over the next ten years, ChangXin accumulated over 36 billion RMB in losses, yet Hefei’s state capital persisted, providing continuous funding and “nanny-style” support while building a surrounding industrial cluster.
This approach—now termed the “Hefei Model”—originated earlier with the city’s 2008 decision to pause subway construction to invest in BOE’s struggling LCD panel production line. That bet later spurred a display industry ecosystem in Anhui. Similarly, ChangXin’s eventual profitability in 2026, driven by AI-driven demand for memory chips, validated Hefei’s patience.
The model reflects a strategic shift in Chinese local public finance: from land-revenue dependence to nurturing strategic industries through equity participation, leveraging state capital to attract private investment, and ultimately securing long-term fiscal and industrial benefits.
However, replicating Hefei’s success is challenging. It requires exceptional political continuity across administrations, professionalized state-capital management teams, precise timing in catching industry cycles, and the resilience to endure prolonged losses without withdrawing—factors not easily copied through policy documents or study tours.
Beyond the headline financial gains, Hefei’s deeper achievement lies in cultivating a robust semiconductor cluster, with over 450 upstream and downstream firms and a sevenfold increase in integrated circuit industry output from 2016 to 2025. While the equity-fiscal concept is spreading, the patience, expertise, and historical contingencies behind Hefei’s execution remain its distinctive, hard-to-replicate core.
marsbit08/18 12:26
