Core Viewpoint - The establishment of provincial state-owned S funds has entered an explosive phase, driven by policy support and competition among local governments to set up these funds, which aim to provide new exit channels for the existing 14 trillion yuan of equity assets [4][14][28]. Group 1: Policy Support and Local Government Actions - The State Council issued guidelines in January 2025 to promote the development of government investment funds, marking the first clear support for S funds at the national level [4][7]. - Following the issuance of the guidelines, various provinces, including Zhejiang, Fujian, and Henan, quickly moved to establish their own S funds, with target sizes of 50 billion yuan each [3][4][11]. - By August 2025, over 10 provincial S funds were either newly established or in preparation, with a total expected scale exceeding 30 billion yuan [14][28]. Group 2: Competition Among Regions - Local governments are engaged in a fierce competition to secure qualifications for regional equity market share transfer trials, which are seen as critical financial infrastructure [5][9]. - The rapid pace of policy issuance reflects the intense competition, with provinces like Zhejiang and Guangdong quickly rolling out supportive measures for S fund development [11][13]. - The competition has led to frequent exchanges among local government delegations visiting leading regions to learn from their experiences [9][10]. Group 3: Challenges in Pricing Mechanisms - A significant challenge for local S funds is the lack of a unified pricing mechanism, leading to delays and complications in transactions [18][21]. - Discrepancies in valuation methods across regions have resulted in increased transaction costs and extended timelines for fund operations [23][24]. - The absence of standardized valuation criteria has created barriers, with local funds often needing to reassess valuations when moving between different regions [22][24]. Group 4: Talent Shortage and Market Dynamics - There is a notable shortage of professionals with expertise in S fund transactions, complicating due diligence processes and increasing reliance on external hires from financial institutions [28][29]. - The market is experiencing a "three reductions" phenomenon, characterized by lower discount rates, declining transaction rates, and insufficient trading continuity, indicating growing divergence in market expectations [24][28]. - Some regions are exploring solutions to enhance pricing transparency and credibility, such as utilizing data from various sources to improve valuation processes [29].