Chongqing - Liangjiang Capital and Chongqing’s major state-owned banks and affiliated asset investment companies (AICs) recently formed a strategic partnership to launch a 20 billion yuan (USD 2.8 billion) private equity fund targeting key tech innovation industries.

In September, the National Financial Regulatory Administration expanded the AIC direct equity investment pilot program—separate from debt-to-equity swaps—from Shanghai to 18 cities, including Chongqing.

Liangjiang Digital Economy Industrial Park in Chongqing Liangjiang New Area. (Photo/Yantong Wang)

A representative from Liangjiang Capital stated that preliminary agreements with several state-owned banks and their AIC affiliates have been reached, setting a collaborative framework. Specific business operations are still under negotiation.

The representative noted that previous AIC investments mainly targeted debt-to-equity swaps, limiting their financial reach. The new AIC pilot reform allows direct equity investments, expanding capital support for tech-driven enterprises.

Reportedly, China currently has five AICs, each established by major state-owned banks. These entities were designed to aid promising but temporarily distressed companies by deploying debt-to-equity swaps, fostering long-term, sustainable growth.

The debt-to-equity swaps involve converting company debts owed to banks into equity held by the banks. Enterprises can utilize future earnings from these equity investments to meet debt obligations, easing their debt burden.

Although this approach does not enable direct cash inflows for enterprises, the pilot reform allows AICs to make direct equity investments, addressing this limitation.

According to a Liangjiang New Area representative, the expanded pilot reform includes two key directives: boost support for enterprise tech innovation to drive growth in tech-focused companies and make investments via private equity funds.

Private equity funds, known as "patient capital," have extended investment horizons and focus on high-growth, unlisted companies. They are ideal for supporting early-stage tech firms that need time to mature.

Media reports further indicate that the pilot reform shifts AICs' core operations from solely debt-to-equity swaps to a combined debt restructuring and tech investment approach. AICs now support enterprise innovation through direct equity investments, advancing tech companies toward growth and industry upgrades.

With policy support, the AIC pilot expansion also eases capital management constraints, raising the limit on AIC investments from 4% to 10% of total assets and increasing the maximum investment in a single private equity fund from 20% to 30% of the fund's total size.