Shanghai to be pilot to invite foreign investment to Chinese PE funds

08:59, January 11, 2011      

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Shanghai is set to become China's first city to allow foreign traders to invest in the country's private equity (PE) under a pilot program, but within a total amount of $3 billion, the China Securities Journal reported Monday.

The pilot program will permit foreign PE fund managers – who meet certain criteria and pass the approval process – to build up a joint-venture equity investment company with Chinese companies.

They can also obtain a currency conversion quota, exchanging foreign currencies into yuan and investing directly in Chinese companies or yuan-denominated funds.

The amount of foreign participation in the PE fund will be subject to the approval of the State Administration of Foreign Exchange, according to reports.

The $3 billion will be invested in China in three batches, and the first chance will be offered to the Carlyle Group, the Blackstone Group and the First Eastern Group.

Analysts said that the new program will allow foreign investors into the emerging Chinese mainland PE, creating opportunities for them to profit from China's lucrative merger and acquisition sector and the Nasdaq-style market that are currently out of their reach, according to reports.

Under current regulations, foreign-invested companies are not allowed to use their capital for real estate and equity investments, or to convert their foreign capital into yuan for local investment, because of China’s capital controls.

Source: Global Times
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