A leading Chinese banker says China should make greater efforts
to develop private equity funds.
Addressing the ongoing First China International Private Equity
Forum held in Tianjin, Wu Xiaoling, vice governor of the People's
Bank of China (PBOC), the country's central bank, said a
multiple-tier capital market including private equity funds was
urgently needed in China.
She said the country's capital market has "two soft ribs" -- the
corporate debt market and the private equity market.
Slow development of the corporate debt market made it hard for
firms to optimize their debt and capital structure and an
under-developed private equity market made it difficult to provide
resources for good listed companies, she explained.
Article 50 of China's Securities Law says that a limited
liability company must meet two requirements in order to go
public.
The total capital of the company should be no less than 30
million yuan, and public share capital should represent no less
than 25 percent of the company's entire capital assets. Companies
whose total capital exceeds 400 million yuan should make no less
than 10 percent available for public subscription when going
public.
"It is very difficult for companies to meet the two conditions,
" said Wu, "so companies are well-advised to raise money on the
private equity market before going public."
Wu believed private equity funds were a catalyst for upgrading
the value of an enterprise.
She said that high deposit savings, improvements to the
financial environment such as the state-owned stake structure
reform, and improved laws and regulations had provided favorable
conditions for the country to speed up the development of a
multiple-tier capital market.
Wu believed the government should concentrate efforts on
training high-quality administrative personnel to manage mutual
fund companies, allow financial organizations to participate in
private equity funds, and ensure that private equity funds have
exit channels.
China has become a place of choice in the Asia-Pacific region
for overseas private equity funds. Statistics show that by December
2006, investments by private equity funds in the Chinese mainland
had reached 13 billion yuan.
Tianjin has been in the spotlight since March 2006 when the
State Council, China's central government, approved a plan to
locate the country's third financial center in Tianjin's Binhai New
Area.
The other two are Shenzhen in south China's Guangdong Province
and Pudong New Area in Shanghai.
(Xinhua News Agency June 8, 2007)