But if the portfolio companies succeed—say, double in value within five years—then the fund’s manager caps the government’s upside from the fund at a predetermined percentage, perhaps 10 percent, and uses private money to buy the government’s shares out at that rate. That leaves the remaining 90 percent gain on the government’s investment to be distributed among private investors who have already seen their own investments double. Private investors are thus incentivized to follow the government’s lead, investing in funds and industries that the local government wants to foster. During China’s
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