A veteran Chinese banker believes conditions are ripe for China
to expand its private equity funds (PEF).
The sentiment was expressed by 77-year-old Liu Hongru, vice
chairman of the Committee of Economy of the Chinese People's
Political Consultative Conference (CPPCC), while addressing Thursday's PEF summit
in Xiamen, east China.
"I believe the demand and conditions for China to develop PEF
have been formed," said Liu, who served as the first chairman of
China Securities Regulatory Commission (CSRC) between 1992 and
1995.
Legislation has been improved, with a host of laws and
regulations having been revised and promulgated in recent years,
such as the Corporate Law, Securities Law, Provisional Measures on
Business Investment and Enterprise Administration, which has helped
lay a legal foundation for the expansion of PEF in China, Liu
argued.
The capital market in the country has been improving, operations
have become more standardized and the split equity structure reform
has been completed, making it possible for all shares of listed
companies to be tradable on the secondary market, he continued.
Along with the fast expansion of China's capital market in
recent years, plenty of international PEF organizations have been
attracted to China for investment purposes, which has in turn
promoted the development of some Chinese businesses, he said.
Liu was supported by Chen Zongsheng, chief of the preparatory
group for the Bohai Industry Investment Fund, but Chen emphasized
the existence of six major difficulties or problems facing the
expansion of PEF in China.
He stressed the impact of the delay in the promulgation and
implementation of the Partnership Enterprise Law, which was adopted
by the Standing Committee of the National People's Congress (NPC) of China last year, but did not become
effective until June 1 this year.
Other problems he outlined included the restrictions regarding
participation of overseas investment in partnership organizations,
management over remittance of hard currencies into China and a lack
of experience on the part of fund management companies in
China.
He also highlighted state-owned enterprises' worries in
participating in PEF, as well as the negative impact exerted by the
rigid PEF registration and approval system, and illegal fund
raising.
"The development of PEF in China will be even faster than
expected if these barriers are removed," said Chen.
Bohai Industry Investment Fund, the first of the kind, was
launched in Tianjin on Dec. 30 last year, with start-up capital of
six billion yuan (US$770 million). The fund will reach 20 billion
yuan within 15 years and provide easy access to funding for small
businesses and firms in the modern, manufacturing and
high-technology fields.
A report on the study of PEF in China, which was patronized by
three organizations including Xiamen University, was released on
Thursday.
According to the report, international PEF organizations were
involved in 129 cases of investment in the Chinese mainland last
year, with a total value of US$12.97 billion.
Asia-based PEF organizations invested US$7.56 billion in China
in the first quarter of the year, up 329.5 percent from a year ago.
It is expected that the size of PEFs will be kept around US$10
billion.
The PEF summit served as a prelude to the 11th China
International Fair for Investment and Trade which is scheduled to
open in Xiamen, a port city in Fujian Province, on September 8.
(Xinhua News Agency September 6, 2007)
