Research on Risk Management and Optimization of Government Industry Guidance Fund

As an innovative tool to leverage social capital and improve the efficiency of fiscal funds utilization, the government industry guidance fund entered the stage of rapid development under a series of favorable policies in China. But at the same time, there still exist many potential risks in its operation. How to identify and control these risks needs to be explored and summarized in theory and practice. This paper will analyze a series of risks and put forward optimization suggestions for risk management in the operation of government industry guidance fund.


Introduction
The government industry guidance fund is funded by the government to attract relevant financial institutions and social capital to jointly establish and support specific stage, industry and regional objectives. In December 2015, the Ministry of Finance defined the industrial guidance fund clearly in the Guidance Opinions on Government Investment Funds with Financial Funds Supporting Industry Development, which pointed out that for strategic leading industries such as integrated circuits and industry leading enterprises, direct investment can be made through the industry investment fund to achieve breakthroughs of the industry. Under the circumstances that the distribution of industrial support funds has changed from appropriation to investment, all departments have set up government guidance funds rapidly. As shown in Figure 1, the number of government guided funds has increased slightly since 2012, and entered a high-speed iBusiness  Reform Commission issued the Guidelines for they should be registered, and they are gradually moving towards standardized supervision, but a complete and systematic supervision system has not yet been formed. Concurrently, the lack of smooth information channel caused by the problems of the internal governance anomie of guidance fund, the lack of internal restraint and incentive system, and the distortion of principal-agent relationship, etc., coupled with the influence of the power rent-seeking of managers, it is difficult to achieve the goal of policy design [1]. The insufficient market operation leads to low investment efficiency, which makes it difficult for the fund to play its guiding role fully and effectively.
Therefore, how to improve the management level of the guidance fund and how to effectively control the risk of it are urgent to be solved in practice.

Literature Review
In China, the risk management of government industry guidance fund is an area that needs further study. Liu Bowen [2] considered that how to play a guiding role and use state-owned assets to attract social capital, how to make guidance fund operate in a market-oriented way, and how to manage fund more effectively are all worthy of consideration. Ren Jie [3] studied the risks faced by the government in the whole operation of guidance fund and put forward corresponding risk management measures based on the theory of information asymmetry and the theory of principal-agent. Cao Jun [4] analyzed the main risks and causes of the guidance fund, and put forward political suggestions, such as establishing market access mechanism and improving supervision and restraint mechanism based on the perspective of principal-agent. Zhao Hongmei [5], based on the specific analysis of the representative national and local government guidance funds, divides the problems faced by the guidance funds into four stages of "raising, investing, managing and withdrawing", and gives some policy suggestions respectively.

System Risk Analysis
Despite industry guidance funds develop rapidly, it still fails to avoid the policy conflict between the FOF (fund of fund) and the sub-funds. As a policy tool, which will not be traded in the secondary market, and fail to be freely traded in the closed period, which will cause the fund to face greater liquidity risk.

Principal-Agent Risk
There are multiple principal-agent relationships in the operation process of guidance fund from the establishment to the selection of fund management companies, to the establishment of sub-funds with social capital, and finally to the investment of enterprises. It can be seen from Figure 2 that the principal-agent problems run through the whole operation of the fund. The existence of multiple principal-agent relationships will inevitably lead to information asymmetry, which also leads to the problems of adverse selection and moral hazard.
Adverse selection is based on information asymmetry; one party uses the advantage of more information than the other party to design a self-interest contract, which leads to damage the interest of other party. In the whole process of guidance funds should rely on sound system design and be supervised before, during and after the event. Otherwise, it is likely to become a rent-seeking tool for some managers [6].

Selection and Management Risk
Choosing a good project is the key to the success of government guidance fund.
But most innovative enterprises deliberately exaggerate their value and development potential to get funds, and deliberately hide adverse information, which undoubtedly increases the difficulty for managers to choose appropriate projects.
In addition, some local governments will limit the investment scope, so there is a phenomenon of "choosing the right place but not the best item". Therefore problems, moral hazard, adverse selection and so on. However, these risks can be avoided to a certain extent by optimizing and improving some measures. Therefore, the government or guidance fund organization should take appropriate control measures to ensure that the role of industry guidance fund is fully played.

Optimization Suggestions for System Risk
Standardizing the information disclosure mechanism to deal with the risks brought by policy and macroeconomic changes. The management team should strengthen communication to systematically and comprehensively grasp the investment situation of the sub-fund. In addition, the government should also improve the content and scope of information disclosure of Industry-guiding fund to restrict the behavior of fund managers. Major investment decisions shall be disclosed after approval, full information disclosure shall also be given for projects not yet decided to invest; a reasonable compensation mechanism shall be established to strengthen the authenticity and effectiveness of information. It is necessary to coordinate various regulatory forces to further strengthen the supervision on the investment and use of funds, so as to conform to the current development trend of government industry-oriented funds.
Carrying out market-oriented operation and avoiding liquidity risk. In the market-oriented operation of funds, it is necessary to use the market to improve the operation level and professional ability of the fund management team, at the same time, effectively mobilize the participation of social capital, and expand the channels of fund sources to banks, securities, fund management and other companies and strong enterprises or individuals. Furthermore, different return rates should be set according to priority and sub-prime for investment funds with different maturities. For example, set a shorter period and a lower return on investment for priority shares; set a higher excess return for secondary investors with holding maturity; according to the actual needs, make appropriate extension to avoid the risk of illiquidity due to the large fluctuation of fund scale [8].

Optimization Suggestions for Principal-Agent Risk
Introducing incentive and restraint mechanism to reduce principal-agent risk. In order to control the risk of principal-agent, enterprises can establish a suitable  for the control of direction and policy, and the professional team is responsible for the specific operation, so as to give full play to the decision-making role of the fund's professional management team and form standardized management.

Optimization Suggestions for Exit Risk
Broadening the exit channel. A single exit channel will hinder the fund's capital circulation. Therefore, governments should constantly improve the exit mode of industrial guidance fund, broaden its exit channels, then adjust and optimize the industrial structure, and provide impetus for the development of emerging industries. The exit channels can be widened by constructing competitive advantages. On the one hand, the invested enterprise has the scarce resources such as key node technologies, products and markets in the whole industrial chain, which constitutes its own competitive advantage; On the other hand, the fund management company can find the buyer who has the demand for the invested enterprise's resources and promote the transaction through the continuous excavation and accumulation of various markets and industries. For example, various financial preferential policies are used to attract more institutional investors to participate in the fund, and encourage the establishment or introduction of foreign investment institutions. At the same time, third-party institutions should be introduced to evaluate the value of investment fairly, so as to ensure the smooth exit of early investors, put an end to the loss of assets and reduce the risks faced by investors. Perfecting the market system of property right. Property rights trading market is an important platform for funds to exit. Therefore, while continuing to develop Shanghai Stock Exchange and Shenzhen Stock Exchange, the SME board, the GEM board should also speed up the improvement of the property rights trading market to improve the exit environment of the fund [9]. 1) The government should appropriately reduce the intervention in the property rights trading market, so as to transform the property rights trading market into the equity transfer service of various ownership enterprises.
2) The regulatory agencies should formulate unified rules of property rights market transactions to break the current situation of regional division of property rights market, so as to share information in each property rights market and form a unified and open market system. 3) The regulators can prevent the secret operation and insider trading, and strengthen the management and training of property right brokers.

Conclusion
Government industry guidance fund is still a new thing for China. Its development is a problem that the society pays much attention to in recent years, and it is also a research hotspot that the academic circles follow. Based on the analysis of the current situation of it in China, this paper analyzes its risks from both systematic and non-systematic aspects. Meanwhile, in order to give full play to