According to the Wall Street Journal, China's government recently has pushed development of its local private-equity industry so that Chinese investors can get in on the country's private-equity deals. To that end, Chinese officials have tried to lure foreign money managers to raise funds from local investors.
Hong Kong-based First Eastern Investment Group, which plans to raise six billion yuan through a new wholly owned Shanghai subsidiary, and Asian brokerage CLSA Ltd., which plans to raise a 10 billion yuan fund through a joint-venture with state holding company Shanghai Guosheng Co., are just the latest to establish local-currency private-equity funds in Shanghai.
News of these deals follows last week's announcement that Blackstone Group (NYSE: BX) plans to raise a five billion yuan ($732 million) fund of a similar nature. Blackstone's partner will be Shanghai Pudong New Area, a development zone in the city's financial district. By setting up a local fund, Blackstone will face fewer regulatory issues because it will represent local investors. This venture could make Blackstone the first major global buyout firm with an onshore presence in China.
Foreign private-equity firms like TPG and the Carlyle Group have dominated China's private-equity industry, investing capital on behalf of international investors. But local private-equity firms are expected provide growing competition for deals because domestic-currency funds face fewer regulatory hurdles.
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