It has been a common practice of governments at multiple levels in China to show their support for promising firms with cash rewards, but Hefei, the capital of Anhui province, is shifting to more sustainable and market-oriented measures.

The provincial capital plans to earmark a total of 2.7 billion yuan ($432 million) to support several industries in 2014, according to a document recently released by the municipal government.

"We have always been resolute in supporting local enterprises, but now we want to find a new encouragement mechanism to work more efficiently," said Han Bin, deputy mayor of Hefei.

At least 50 percent of the money will be used to establish investment funds, which are expected to attract four times more money from social investors.

The funds are designed to be run by international and professional fund management companies and expected to serve as "snowballs" in attracting money, enabling the government to have even more money to support more companies the following year.

Another 20 percent to 30 percent will be lent to enterprises that need financing to reach certain goals, such as to be publicly traded. Supported by the government loans, the companies are expected to reach such goals more easily.

If the firms succeed in achieving their stated goals, the loans will be forgiven. Otherwise, they need to repay the money.

"Previously, nearly 90 percent of the budgeted money was distributed to companies merely as rewards after their goals had already been achieved, when they actually didn't need money so urgently as they did before certain events," Han said.

It is also believed the traditional practice more easily causes corruption, as the government "plays both as a player and a referee at the same time", Han said.

In the new plan, the money used for cash rewards has been narrowed to no more than 20 percent of the total.

Other financial practices including credit and trusts will also be adopted, with details to be decided according to needs.

"Every single measure is not an invention by our city, but a systematic mechanism with balanced adoption of all the measures is indeed a bold try among the country's municipal governments", said the deputy mayor.

Enterprises engaged in new industrialization, self-dependent innovation, modern agriculture, the service sector and cultural business are expected to benefit the most from the new policies.