BEIJING, Jan. 15-- China is leveraging government-led venture capital (VC) investment to help innovative firms in an effort to bolster new economic growth areas.

On Wednesday, China's State Council announced it would create a venture capital fund worth 40 billion yuan (6.5 billion U.S. dollars), in order to guide social capital toward new industries,

Apart from the central government fiscal budget, the fund will mainly incorporate capital input by big companies, large financial institutions and other private sources, according to the State Council.

"Through the scheme, the government is actively leveraging available fiscal funds in order to let them play a bigger role in raising more money from all channels, and pointing a direction for optimized industrial investment," said Zhang Zhanbin, a researcher at the Chinese Academy of Governance, a government think tank.

The cabinet said the fund would mainly invest in companies that showed innovation in emerging sectors. They would invest in companies at early stages of development in particular.

Zhang said "it is important that the guiding venture capital fund have a clear investment position, which is to mainly support emerging industries of strategic importance and start-ups keen on innovation."

Similar funds initiated by the government in the past, even though designed to beef up investment for start-ups and emerging industries, have been ineffective due to weak management, administrative intervention, and absence of strict assessment and supervision, he said.

Improving on past experiences and choosing market-oriented operations, the fund will be managed by professional fund management companies, which are to be selected through an open bidding processes. The companies will also make independent investment decisions, according to the State Council.

Chinese authorities view innovation as a strategically significant strategy to prop up the economy as it enters a new normal, when growth shifts to a medium-to-high level and structural reforms are emphasized for sustainable development.

Zhang said science and technology innovation and application in the real economy must be prioritized in the new normal.

The government's latest fund initiative will be more targeted in addressing the financing needs of small and medium-sized companies, promoting industrial upgrades, and nurturing new growth engines, he said.

China's central government first launched VC investment programs in 2009 in efforts to boost an innovation-led economy.

Official data showed the central government has allocated 9.1 billion yuan for such programs since then. The fiscal funds have further amassed up to 42.7 billion yuan in total capital value from local governments and other channels so far.

Downturn in traditional sectors such as real estate and lackluster growth in exports dragged on growth in the world's second largest economy during 2014, with third-quarter economic growth sliding to 7.3 percent, the lowest growth level since the 2008/2009 global financial crisis.

Denominated in Chinese yuan, exports increased 4.9 percent to 14.3 trillion yuan in 2014, sharply down from 7.9 percent in 2013. Figures for last year's gross domestic product are slated for release on Jan. 20.