The financial crisis will have uncertain influences to China’s economy but will not change the direction of China’s high economic growth, nor the development of the PE industry in China.
Chinese government attached great importance to the PE industry. In order to support the development of the industry, limited partnership was added in the Law of the People's Republic of China on Partnerships amended by the Standing Committee of the NPC. Interim Measures for the Administration of Startup Investment Enterprises was promulgated by NDRC and other nine ministries and commissions. NDRC, MOF and MOC jointly promulgated Directives on Startup Investment’s Introduction of Standardized Establishment and Operation of Funds. Management Methods on PE Investment Funds is also under preparation.
From 2006 to Q3 of 2008, 138 private equity institutions had successfully raised $100.553 billion and invested 384 projects in China. In Q4, 2008, China approved the establishment of the 3rd group of industry investment fund and started the establishment and raise of new funds successively.
Beijing boasts of special advantages as the core area for the development of China’s PE industry.
First, improving financial development environment will provide good conditions for the development of the equity investment fund. Financial development environment is the core for the development and buildup of the financial industry and an important issue during Beijing’s construction of an international influential financial center. The CPC Committee and the People’s Government of Beijing have successively promulgated a range of policies including Opinions on Promoting the Development of Beijing’s Financial Industry to set up a quality policy environment for PE funds and other financial institutions. Beijing’s financial development environment will be continuously improved and optimized in the aspects of service, supervision, policy, credit, brokerage, publicity, security and information.
Second, Beijing is the fixed assts management center in China and has a sound basis for the development of PE. Beijing Financial Street houses PBOC, CSRC, CBRC, CIRC and 500+ financial institutions, which controls about 90% credit fund and 65% insurance fund of the national total with the daily circulation fund above 10 billion yuan. China Investment Corporation, National Council for Social Security Fund and National Development Bank also concentrate on Beijing, providing sufficient funds for the equity investment development.
Third, Beijing also boasts an enormous number of enterprises worthwhile for investment. Zhongguangcun Sci-tech Park alone has more than 20,000 hi-tech enterprises with an annual growth of 2,000 hi-tech enterprises which have good growth and great potential and are best objects for PE investment. With the economic structure adjustment and the acceleration of industrial upgrading, the number of quality enterprises will be continuously increased. Meanwhile, PE may screen objects for investment by means of Beijing’s advantage as a nationwide comprehensive information platform.
Fourth, Beijing is a home for national and even global financial talents and financial education and training institutions, ranking No. 1 in talent competency across China. Beijing also boasts of a great number of entrepreneurs, business leaders, returned students and young practitioners with high quality and enough knowledge, which are the valuable wealth for PE development.
Fifth, a multi-level and diversified investment and financing system will provide multiple exit channel and mechanism for PE’s development in Beijing to spread the PE investment risks. First, the stock issuance approval institution houses in Beijing, easy for PE institutions to know information and exit from A-share market. Second, Zhongguancun Park’s brokerage of equity transfer provides a new channel for the exit of PE funds. Third, CBEX, as an innovative equity exchange platform with booming transaction types, presents diversified mechanism for the exit and development of PE.