Premier Li Keqiang said the planned investment fund for startups in emerging industries must be market-oriented and efficient.

The Premier made the comments at an executive meeting of the State Council on Jan 14.

The government decided at the meeting to set up a 40 billion yuan ($6.46 billion) investment fund to support innovative startups, so that more technological innovations will have access to the market and bring real benefits to the country’s industries.

The fund is set to consist of the government’s special fund for developing strategic emerging industries and special fund for infrastructure construction, and is also expected to attract large enterprises, financial institutions and private capital to contribute.

Premier Li said that tapping into the financial resources of different government funds will allow the investment fund to help make the government’s fiscal policies to support innovative tech companies more effective..

The government decided at the meeting to select fund management companies to run the fund through competitive bidding. The companies will also make investment decisions.

The Premier said the government used to allocate its special funds directly to different projects - which compromised the effectiveness of the money and also allowed for corruption to emerge.

“The money allocated probably ended up in just a few scientific papers or led to some kind of research outcome that could not be turned into something productive. But this fund will help to create jobs - and will also allow the government to take profits on its investment,” he said.

However, he also mentioned the possibility of the fund losing money, but added: “If more and more people join the innovation drive - encouraged by the investment fund - this could be considered an adequate level of profit.”