Chillin' out till it needs to be funded
zyakaira notes: With more than 400 funds already operating in China, the government is taking steps to formalize regulation as this may be the big ticket boost need for the Chinese economy to grow. Understandably, the first few funds are mostly equity focussed domestic funds. The debt situation has spiralled with $7 tillion yuan in debt or USD 1 trillion and they now need other avenues to fund growth while the markets become more cautious as governments goes after the likely bad debt spiral given local practices
Goldman Sachs Group Inc.(GS), also is planning to raise a domestic private-equity fund for his Beijing-based Hopu Investment Management Co., after raising $2.5 billion from overseas investors. Tax rate differences between Hongkong and China may not be addressed in one go in upcoming regulation
(Bloomberg) Blackstone Group LP’s(BX) joint venture with Shanghai’s government may be a first step in China’s effort to build its own private equity industry as the government seeks to foster corporate governance and strengthen capital markets.
Blackstone, the world’s biggest private equity firm, will set up a 5 billion yuan ($732 million fund), marking the first partnership between a global buyout firm and the Chinese government.
The Blackstone Zhonghua Development Investment Fund will be created with the newly formed government of Pudong New Area, Blackstone said in a statement Aug. 14.“The long-term goal is Chinese private equity,” said Adam Segal, a senior fellow of China studies at the Council on Foreign Relations.
“The Chinese don’t want their industry to be dominated by Blackstone and Carlyle.”The venture is part of China’s plans to establish itself as a major player in the global economy, said Doug Guthrie, a professor of management at New York University’s Stern School of Business. During the 1980s, China was aiming to be the world’s biggest manufacturer. In the 1990s, the country was seeking partnerships with multinational companies, including financial firms.
Now they want to develop their capital markets, he said.“This has nothing to do with needing capital and everything to do with gaining the institutional know-how to do it on their own,” Guthrie said.Targeting ShanghaiThe fund will target investments in Shanghai and neighboring areas. China and Blackstone didn’t disclose the structure of the fund. Blackstone spokesman Peter Rose declined to comment beyond the statement.
Blackstone will be the first global private-equity firm to secure investment from a tier-one city government in China.The agreement signifies China’s endorsement of private equity to bolster corporate governance and profit, said Vincent Chan, co-founder of China-focused fund Spring Capital Asia Ltd. TPG, Carlyle Group and KKR & Co. haven’t established domestic funds.