| Since the establishment of the China Venture Capital Company in 1985, the extension of the venture capital market in China is always accompanied by the state owned capital which, in addition to fund support, also have been on charge of the operation of the venture capital for a very long time. However, the institu-tional environment indicated by the level of rule failed to follow the steps of the joint venture capital. Take the statutory law for example, the regulations governing the venture capital (including state owned funds) did not come into force until after 2002. Virtually, the view that market economy is an economy under rule of law which is constantly referred to by the conception of Law Supremacy in thus con-fronted with "challenge"-since the venture capital market is not naturally precondi-tioned on our legal system, from the macro perspective of Law and Finance, how are they related or are they related at all?Existence does not necessarily indicate reasonableness, but it must have caus-es. This thesis seeks to, based on the contrary between the practice and theory in the participation in the venture capital market by state owned fund, explore one question:how does the state owned fund establish and operate the venture capital market despite the lack of a sound legal regime? This Thesis intends to give its analysis in progress by the following chapters:Chapter I is the introduction of the whole thesis, and intends to not only clari-fy the paradox between the practice and theory as aforesaid but also present my interpretation of this thesis in the outset which is the core theory of this thesis: there exists an interactive helical structure between the law and finance. On the one hand, it admits that law illustrates, inherits, and strengthens the economy de-velopment in a specific period but denies taking the invention and reform of the laws as granted. On the other, it admits the law as an active element restricting the economy development. In order to specify the position of this theory in the aca-demic clue, this chapter has picked up four classical documents (i.e. LLSV, Pistor, Coffee and RIETI SF, whose theories are coherent) from the theory of Law and Economic Development and thinks that despite the interaction that may be felt, such documents primarily focus on the unidirectional exploration on the relation-ship (which is innovative). Thus, the Development of Law and Economy and the Interactive Helical Structure that this thesis seeks to establish is different from the exogenous doctrine of Law Supremacy believing that the growth of law is inde-pendent from the economic development and the market transaction cannot be done without a mature legal system and is distinct from the endogeneity of law, the unidirectional doctrine of rule of law believing that the laws illustrate and solidate the transaction balance in practice.Chapter ? intends to, from the practice view, elaborate the pattern and evolvement of the participation into the venture capital by the state owned funds of our country. Apparently, my observation is from a time and spatial dimension which clears up the pattern of the state owned fund's participation from overseas comparison perspective, i.e., shareholding, during my research during the years from 1985 to 2016 finding a material change in the pattern of the equity participa-tion of the state owned fund around 2002:from control to non-control. In conclu-sion, the state owned fund's participation in the venture capital market in our country is different from the pattern of debt financing in United States, and has gone through the alteration from control to non-control during the promotion of the share holding pattern. These facts shall be the basis of my following analysis.Chapter ? serves as a theoretical explanation for the feature mentioned above-why dose state owned fund participates in the venture capital. For the ease of my wording, the match is demonstrated in this chapter between difficulty exposed to the newly set-ups in Gaoxin district and four specific financial model including bank financing, private lending, internal shares and VC (venture capi-tal). By virtue of the match, the necessity for the development of venture capital stands out. Besides, the condition of investment failure-herd effect and scale ef-fect and the value of interference of state owned fund in such case will be de-scribed. Relatively, there is a counterpart plan served to solve the failure, that is, "development after regulation". By such comparison between the two plans, the participation of state owned fund in the VC failure is a rational choice rather than a policy compulsorily implemented in a legislation-oriented society. In other words, it is the market, not legislation, that enables the participation of state owned fund. The interference and legal system are independent.In the background of law deficiency and reputation failure, featured by the VC in China, Chapter ? continues to dig out the reason for the participation of state owned fund in the VC. The respective premises of Chapter ? and of Chapter ?, the same market failure with different control risk, are the main distinction be-tween the two chapters. So, this chapter begins with a kind of bilayer agency cost from the perspective of risk formation. Unfortunately, in the beginning of the es-tablishment of VC, the market suffers from both deficiency of law restriction and ill reputation, which raises the agency cost. Accordingly, the participation of state-owned fund relieves such dilemma and reduces the cost owing to its area limitation and political relevance. To sum up, the initial participation of state-owned fund is independent from legislation.Chapter ? lends theoretical analysis to the feature mentioned above, that is, why state owned fund participates in VC in the form of direct or indirect shares-holding. In brief, the difference of law system such as the high requirement for a credit-debt model leads to the uncertainty of the income of cooperative investment and financing, and thereby influences the different adoption of cooperation. For the direct investment part, the reason is related to the collective edge of human re-source, technology, and capital promoted by the existent law system. And the rea-son finally gives rise to a "rout reliance" on the form of participation. As to the indirect investment, the first cause dues to the restrictive effect after the law sys-tem has changed. And the second one is that the participation of foreign business and private enterprise exercises competitive pressure on state owned fund, which also proves the changes in the regulation and law system unavoidably have an in-fluence on economic development.Chapter ? is a conclusion if this thesis which is also extension. On the one hand, I, through analysis of the establish and development pattern of our venture capital market, find that the participation of the state owned funds is a necessary outcome of the economic development rather than any arrangement or design by the statutes. Moreover, the participation of state-owned fund makes up for the ini-tial law deficiency and reputation failure, which shows the independence of eco-nomic development from law system in the beginning of VC development. Mean- while, the direct or indirect investment, in turn, lend credit to close connection be-tween economic development and statutes. On the other hand, this thesis rather than denying the effectiveness of the laws (for instance, the choice of investment pattern is the outcome of statutory restriction.), seeks a thorough understanding of the relationship between the law and economic development through insight into the course of a specific transaction. What's more, the interactive helical structure between the law and economic development refined from this thesis may also be applied to the discussion on state-owned enterprise reform and public and private partnership. |
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