China has established a large fund to support projects designed to lift millions of people out of poverty.

The investment fund has been set up with an initial 12.2 billion yuan ($1.81 billion; 1.5 billion euros; 1.4 billion pounds) in capital from 51 state-owned enterprises, including the State Development and Investment Corp and the State Grid.

That sum will eventually grow to as much as 100 billion yuan, according to a statement from the State Council's State-Owned Assets Supervision and Administration Commission.

The fund was launched to coincide with the nation's third Poverty Alleviation Day on Oct 17.

Unlike most poverty alleviation funds managed by the government, the new fund will be run by an investment company to make sure it is sustainable and profitable, said Wang Huisheng, chairman of SDIC, the government holding company that owns the investment company.

Projects that can create more jobs and bring more people out of poverty will be favored, with priority given to poor provinces, border areas and regions with large ethnic populations.

Liu Yun, vice-president of SDIC Chuangyi Industry Fund Management, which will oversee the fund, said the bottom line is to "break even and seek a meager profit".

"Our biggest difference compared with most other fund managers is that we don't just go for the biggest profits," Liu says. "Our major concern is to balance political impact and economic return."

"We have to make sure most of the projects we invest in are profitable. But we'll also tolerate some losses when the poverty relief effect is significant," Liu says.

To keep pace with China's national strategy to eradicate extreme poverty by 2020 - that is, to ensure every Chinese earns more than 4,000 yuan a year - the state-owned assets commission has required that the initial 12 billion yuan is invested by 2018, according to an internal report acquired by China Daily.

In June 2014, the Ministry of Finance, SDIC and China Tobacco established a poverty alleviation fund of 2.8 billion yuan, the first of its kind in China. Liu, whose company also runs that fund, says the investment strategy will "be almost the same", with the aim of maximizeing the business impact.

The first deals have been signed with local governments and companies in Hebei, Henan, Jiangxi, Guizhou, Yunnan and Qinghai provinces, according to a news release on Oct 17. Details have not been disclosed.

Liu Yongfu, director of the State Council Leading Group for Poverty Alleviation and Development, warned that the fund should be carefully supervised to make sure the money is channeled into the right places.

"Not every investment can qualify as targeted poverty alleviation," he says. "Targeted poverty alleviation is not giving things and money away. That's why we set up the fund. It should not only go with the policy, but also go by market rules."

This year, China has allocated more than 100 billion yuan of government-controlled funds, a record amount, to help lift more people out of poverty, according to Su Guoxia, a spokeswoman for the leading group.

Funding from the central budget was increased to 66.7 billion yuan, up by 43.4 percent from last year, while provincial budgets exceeded 40 billion yuan, an increase of more than 50 percent.

On Oct 17, the State Council Information Office issued a white paper on China's progress in poverty reduction and human rights.

Contact the writers through chenmengwei@chinadaily.com.cn