The trial of China's new Qualified Foreign Limited Partnerships (QFLP) policy is proving to be a hit with overseas private equity (PE) companies, who are showing interest in the direct-investment channel.

The policy allows a certain number of foreign PE funds to make equity investments in China after exchange settlement.

Brian Zhou, of Carlyle China, told China Daily that Carlyle Group welcomes the QFLP policy.

"We are pleased to be one of the first companies to enjoy the benefits of the policy. We expect it will help us to expand our investment capability in China," he said.

Shanghai is now releasing QFLP guidelines for companies and Carlyle is one of just three to gain a license so far.

According to Zhou, Carlyle has invested more in China than any other PE company - to date, about $3.2 billion of equity in more than 50 transactions focusing on a number of areas of domestic demand.

The Economic Information Daily said earlier that the settlement amount for PE companies in Shanghai could be as much as $3 billion. However, Zhou told China Daily that the financial details have yet to be finalized.

Recently, the southwestern municipality of Chongqing has been seeking to establish itself as a financial center by adopting policies that are attractive to investors, including QFLP.

Infinity Group, a leading Israeli investment vehicle, announced last week that it had signed an agreement to set up a $2 billion fund in Chongqing.

"We have decided to set up the fund here because of the attractive policies, especially for QFLP," said a spokesman at Infinity China, who said that the Chongqing government has promised to give the fund strong support on receiving QFLP status, but did not specify details of the settlement amount.

China's limited partnerships are mainly government-guided funds, social security funds and private capital. Yuan-denominated PE funds are ineligible to raise capital from agencies such as commercial banks and insurance companies.

According to a recent report from Zero2IPO, a leading Chinese PE research agency, the launch of the QFLP policy will encourage more overseas investors to enter the Chinese market.

Chen Zhipeng, a former senior investment manager at Kaixin Investment Co, set up by China Development Bank Corp and CITIC Capital Holdings Ltd, said that the new QFLP policy is a positive signal for PE companies, despite the strict controls on foreign exchange.

However, he sounded a note of caution. "The settlement-amount may not be large enough for foreign private-equity giants," Chen said. "The government will also be concerned about excessive 'hot money' inflows," he said.