China's state-owned enterprises (SOEs) are encouraged to set up venture capital funds that focus on early-stage, small-scale, long-term and core-technology investments, an official statement said on Monday.

The statement released by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council said that the SASAC and the National Development and Reform Commission have jointly issued policies and measures to promote the high-quality development of SOEs' venture capital funds.

In response to the issues of being reluctant to invest and being unwilling to invest in state-owned venture capital, relevant policies and measures have been put in place to enhance the assessment as well as due diligence and compliance liability exemption mechanisms that are in line with the characteristics of SOEs, according to the statement.

A full lifecycle assessment mechanism for venture capital funds, with a focus on their functional role, should be established, without solely pursuing financial returns, the statement said.