Recently, Hefei State-owned Assets has once again gained recognition as a 'venture capital expert'.

The reason is that in 2021, it extended a 'helping hand' with fundraising. The share price of Ofilm, which it invested in, soared, doubling from its low of 6.22 yuan per share. As one of the shareholders, Hefei State-owned Assets cashed out approximately 1 billion yuan at a high point.

As a result, Hefei State-owned Assets' stories of placing bets on BOE, investing in NIO Inc., and bottom-fishing Ofilm have once again been recalled.

Currently, Hefei is gradually shedding the shadow of 'venture capital' and is fully committed to the layout of the new energy vehicle industry, making a sprint towards becoming the 'Capital of New Energy Vehicles'.

Three successful investments

Hefei State-owned Assets' first bottom-fishing story dates back to 2008, when BOE was planning to build a 6th-generation production line. Affected by the financial crisis, the domestic display industry was also in ruins. Building such a 6th-generation line required an investment of at least 17.5 billion yuan. BOE was severely loss-making and simply could not afford it.

In fact, Hefei's local fiscal revenue in 2007 was just over 10 billion yuan. Ultimately, BOE offered a private placement of shares worth 6 to 9 billion yuan to five companies affiliated with the Hefei Municipal Government. Hefei bet the city's resources on the LCD industry, investing in the construction of BOE's 6th-generation TFT-LCD panel line.

Two years later, BOE's 6th-generation line in Hefei successfully commenced production, bringing a multiplier effect. Hefei's home appliance industry surpassed 100 billion yuan in scale in 2011, becoming China's largest home appliance production base.

Fast forward to February 2020, when NIO was experiencing sustained losses, massive layoffs, executive departures, unfavorable financing, and faced the crisis of delisting. At a critical moment, the Hefei government stepped in to rescue the situation, leading Hefei, Anhui, and State Investment to invest 7 billion yuan in NIO.

At the time, NIO CEO Li Bin revealed in a live stream, 'NIO has been fundraising in the US dollar market and has only conducted one RMB financing, which was the investment from Hefei, Anhui, and State Investment in NIO, but we quickly repaid them five times over.' After this rescue investment, NIO also propelled Hefei to become one of the global production bases for new energy vehicles. This was Hefei State-owned Assets' second successful bottom-fishing investment.

The third bottom-fishing investment was related to Ofilm. In 2016, Ofilm became one of Apple's key suppliers in China by acquiring 'Guangzhou Delta' (then known as Sony Electronics South China Co., Ltd.), a company specializing in micro-camera modules and optical lenses. However, on March 16, 2021, Apple terminated its procurement relationship with Ofilm. At the same time, Huawei, another major customer of Ofilm, was also experiencing a tough period due to sanctions from the United States and others.

Having lost both major business pillars, Ofilm disclosed the results of its private placement on the evening of September 23, 2021. The issue price was 6.22 yuan per share, with a total fundraising amount of 3.53 billion yuan. All seven subscribers participating in the private placement had state-owned asset backgrounds. Hefei State-owned Assets invested 2.2 billion yuan, accounting for 62.9% of the total fundraising. Among them, Hefei Construction Investment Holding (Group) Co., Ltd. (Hefei Construction Investment) received approximately 1.2 billion yuan, and Hefei Heping Investment Co., Ltd. (Hefei Heping) received approximately 1 billion yuan.

As early as 2020, the Hefei Municipal Government had already started cooperating with Ofilm to establish an optical and optoelectronic industry base project.

Later, the total investment in the Ofilm Optical and Optoelectronic Industry Base Project in Hefei exceeded 10 billion yuan. It took only seven months to achieve light-up and production, setting a national record for the fastest construction speed of electronic information factories. Ofilm also brought a cluster effect to Hefei, complementing the city's new energy vehicle industry chain with its automotive camera business.

On October 29, after Ofilm's share price soared, Shenyin & Wanguo Securities Anhui Branch sold nearly 1 billion yuan, ranking first. Considering its sales volume and location, it is speculated that Hefei State-owned Assets cashed out nearly 1 billion yuan at a high point.

The Essence of Industry Investment

The 'three successful investments' have formed the Hefei Model of 'investment-led attraction'.

The core of the 'Hefei Model' is that state-owned investment platforms act as cornerstone investors, investing in leading enterprises and major projects, leveraging strategic investors to follow up and participate in long-term investments, playing a leading role, thereby forming a closed loop of 'state-owned asset leadership - project landing - equity exit - cyclical development', and ultimately driving industrial upgrading.

BOE has driven the formation of a 100 billion-yuan new display industry cluster, NIO Inc. has helped Hefei become a global production base for new energy vehicles, and Ofilm has complemented the automotive camera segment in Hefei's new energy vehicle industry chain. By introducing 'chain leader' enterprises in the industrial chain, upstream and downstream enterprises in the chain are attracted to gather, thereby forming an industrial cluster.

Luo Yunfeng, the current mayor of Hefei, once provided a set of data. In 2023, Hefei accelerated the construction of a 'venture capital city' and iterated on the 'investment-led attraction' approach, attracting nearly 1,000 industrial projects with a total agreed investment of over 500 billion yuan.

This is also inseparable from the support of Hefei's government-guided funds. In 2022, the Hefei Municipal Government established a government-backed fund with a total size of 20 billion yuan, focusing on high-quality investment institutions, central enterprises, leading enterprises in the industrial chain, and scientific and technological incubation carriers. At the same time, Hefei has also focused on building three major state-owned asset platforms: the Construction Investment Group, the Industry Investment Group, and the Xingtai Holding Group, exploring a diversified investment and financing system of 'industrial funds + guiding funds + angel funds', and constructing a fund portfolio covering the entire lifecycle of enterprises, including the seed stage, start-up stage, growth stage, and maturity stage, with cumulative investments in over 1,500 projects totaling over 140 billion yuan. Currently, the scale of Hefei's funds has exceeded 420 billion yuan.

Meanwhile, to communicate on the same wavelength as enterprises, Hefei has built a team of talents who understand the industry and policies. From municipal leaders to ordinary investment promotion personnel, everyone in the city is deeply engaged in studying and researching industrial investment and financing policies, industry development reports, listing prospectuses of listed companies, and various other industry-related information.

It can be seen that the success of the Hefei Model is far from being fully captured by the term 'strongest venture capital'. As a leader in Anhui Province once summarized, 'To be precise, Hefei is not a venture capital but an industry investment; it relies not on gambling but on striving. Because gambling is about having today but not tomorrow, while striving is about seizing today to win tomorrow.'

Building the City on Industry

As early as 2006, Hefei proposed the goal of 'building the city on industry'.

In 2024, Hefei is still actively engaged in industrial investment. At the end of September, it invested an additional 3.3 billion yuan in NIO Inc. and took control of Wenyi Technology in October, accelerating the layout of the new energy industry cluster.

The latest data shows that in the first three quarters of 2024, Hefei's GDP reached 969.71 billion yuan, with a year-on-year growth of 5.4%. The added value of industrial enterprises above a designated size increased by 15.2% year-on-year, 9.4 percentage points higher than the national average. Among them, the flat panel display and electronic information industries, as well as the automotive industry, both maintained double-digit rapid growth, with respective year-on-year increases in added value of 36.7% and 34.3%, collectively contributing over 80% to the growth of industrial enterprises above a designated size.

In 2024, Hefei proposed the goal of 'building the Capital of New Energy Vehicles' and positioned the new energy vehicle industry as its 'primary industry'. Currently, the city has gathered six automakers: JAC Motors, BYD, NIO Inc., Volkswagen, Changan Automobile, and Ankai Automobile, completing a 'trinity' layout of complete vehicles, components, and aftermarket services.

As of October 21, Hefei's new energy vehicle production in 2024 has exceeded 1 million units, and it is expected to exceed 1.3 million units for the entire year, with a year-on-year increase of 74%. In the race to become the 'Number One City for New Energy Vehicles', Hefei, as an up-and-coming city, is expected to surpass Shenzhen, Shanghai, and Xi'an.

The rise of Hefei in Anhui Province and Changzhou in Jiangsu Province also shares many similarities. Changzhou seized the opportunity to bottom-fish high-quality enterprises like CALB, renaming it Zhongchangxin Hang through capital operation and achieving a Hong Kong stock market listing. At the same time, through capital investment and other means, it attracted leading enterprises such as Jiangsu Times New Energy Technology Co., Ltd., a wholly-owned subsidiary of Contemporary Amperex Technology Co. Limited (CATL), and the headquarters of Hive Energy to settle in the city, forming an industrial cluster.

In the fierce competition in the new energy industry, Changzhou has gained a first-mover advantage. In the field of power batteries, Changzhou has formed an industrial layout with 'Liyang and Jintan as the two cores, with multiple support points in other regions'. It has over 130 production and supporting enterprises, covering 31 key links such as battery materials and system technology research and development, with a complete industrial chain of 97%, ranking first in the country.

In fact, Hefei and Changzhou both have layouts in the new energy vehicle sector, possess complete industrial chains, and have comparable strengths, but their focuses are different. One aims to be the 'Capital of New Energy Vehicles', while the other strives to be the 'Capital of New Energy'.

At present, Hefei has achieved city-building through industry and has formulated plans for the next step. By 2027, it aims to form 2-3 automakers with annual production of 500,000 vehicles, add 10 component enterprises with a scale of 10 billion yuan, achieve a new energy vehicle production capacity of over 3 million units, and generate over 700 billion yuan in cluster revenue.