Core Viewpoint - The article discusses the challenges and opportunities in the Chinese venture capital market, particularly focusing on the impact of tax policies on investment dynamics and the need for reform to stimulate private capital involvement [3][11][12]. Group 1: Current Market Situation - Despite the government's emphasis on technological innovation and venture capital development, the actual market performance has been underwhelming, with the venture capital market in China still in a downward trend as of 2025 [3][5]. - The investment scale of venture capital funds in China has reverted to levels seen around 2016, indicating a significant decline since 2021 [5]. - The funding sources for venture capital have shifted, with government and state-owned enterprises contributing nearly 60% of the total funding by 2023, highlighting a structural change in the market [5]. Group 2: Tax Policy Comparison - The article compares the tax systems of the US, UK, and China, noting that the US has a more favorable tax structure for venture capital, allowing for tax benefits that encourage investment in early-stage companies [6][8]. - The US tax system allows for capital gains to be taxed at lower rates compared to ordinary income, with specific provisions for small business investments that provide significant tax relief [7][9]. - In contrast, China's tax regime imposes higher tax rates on venture capital gains, with personal partners facing rates up to 35%, which is significantly higher than the 20% rates in the US and UK [10][11]. Group 3: Challenges in China's Tax System - China's current tax system for venture capital is based on outdated regulations that classify venture capital funds as ordinary partnerships, leading to mismatched tax rules that do not align with the nature of equity investments [11]. - Key issues include a lack of stability in tax rules, incomplete tax information transparency, and high capital gains tax rates that deter investment [11][12]. - The execution of policies aimed at supporting early-stage investments has been poor, with many investors unaware of the available tax incentives due to complex application processes [12]. Group 4: Recommendations for Reform - To enhance the venture capital landscape, the article suggests establishing a dedicated tax system for venture capital funds that clarifies the tax treatment of limited partnerships and allows tax benefits to extend to upper-tier investors [13][15]. - It advocates for increased tax incentives for investments in seed and early-stage technology companies, proposing a tiered tax relief system based on the duration of investment [15]. - Simplifying the application process for tax incentives and improving awareness among investors are also recommended to boost participation in the venture capital market [15].