Shanghai under fire for plan to compensate venture capital firms for losses

Professional investors are criticizing a plan by Shanghai’s municipal government to compensate venture capital firms for their losses to encourage innovation, Caixin reported. Startin in February, firms that have invested in high-tech startups in Shanghai since the beginning of 2015 can apply for compensation if their investment loses money. “A fundamental principle of the market economy is the match between risk and return,” said Andrew Yan, managing partner at SAIF Partners. “VC investments are extremely risky and limited to only a very few people and institutions. The negative consequences of using public money to compensate investment losses will be unimaginable.”