Chinese securities firms cleared to participate in private equity

A total of 34 securities firms have been approved to launch private equity funds under the pilot program and the Securities Association of China estimates that investments have reached RMB10.2 billion ($1.5 billion). Under new guidelines issued by the China Securities Regulatory Commission (CSRC), they can now incorporate these private equity operations into their regular businesses. Any qualified securities firm can also apply to the CSRC for a business license to set up a private equity fund.

However, companies will not be allowed to invest more than 15% of their own capital into private equity vehicles they set up. Furthermore, the maximum number of investors permitted in any one fund has been capped at 50.

As it stands, investments must be made from the securities companies' own capital reserves. Last year, China International Capital Corp (CICC) tapped third-party investors to raise a $500 million US dollar-denominated fund through its Hong Kong unit. The broker is on course to announce a RMB1.5 billion ($231.5 million) first close on its debut renminbi-denominated fund, with a full target of RMB5 billion ($771.7 million). Investors are likely to include the National Council for Social Security Fund and China Development Bank.

Liu Zhao, executive director of the new renminbi fund, said that CICC expects private equity to account for 20%-30% of total revenue within five years.

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• Topics
• Financials
• Greater China
• Renminbi fund
• CICC
• CSRC