J.P. Morgan gets green light for $1b RMB fund

The fund will operate under the Qualified Foreign Limited Partner (QFLP) program, making the US investor the largest ever foreign manager of a renminbi vehicle, according to the Wall Street Journal. The QFLP license allows the firm to convert up to $1 billion worth of capital from foreign LPs into Chinese currency for investment into companies in and around Beijing.

J.P. Morgan's new fund will be known as the JPM China Private Equity Fund, and is likely to include contributions from private and institutional investors based both onshore and offshore. It will be a joint venture with the Beijing city government, which has allocated a third of its QFLP quota of $3 billion to the vehicle. It is as yet unknown whether the government intends to invest in the fund, which is expected to invest in a range of sectors, from consumer-related services and health care to technology and media.

The Beijing leg of the QFLP plan was launched earlier this year, following the success of a pilot program which allowed overseas LPs to use renminbi to invest in Shanghai-incorporated PE funds. That pilot scheme, which came into effect in January, made Shanghai the first territory to allow overseas investors to invest in China using foreign currency - a substantial piece of legislation given that foreign LPs were traditionally been barred from such activities.

The Blackstone Group, The Carlyle Group and local PE firm DT Capital were accepted onto the Shanghai government's QFLP scheme in May, closely followed by First Eastern Investment Group, SB China Venture Capital and Shanghai Guosheng CLSA Venture Capital in June. It is understood that Carlyle and Blackstone were each given a quota of $100 million.

A sixth Shanghai-approved fund, Hony Capital, made the first investment under the Shanghai program by injecting capital into gloves manufacturer Shijiazhuang Hongray Group in September. The deal was made in renminbi but came via Hony's fourth US dollar fund, which closed at $1.4 billion.

In Chongqing, meanwhile, Israeli-China focused private equity firm Infinity Group was also approved by the municipal government for its QFLP program in May.

QFLP-approved foreign funds are able to bypass a procedure that requires approval from the country's foreign exchange regulator on every transaction. However, they do still require approval from the Ministry of Commerce.

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• Topics
• Renminbi fund
• Healthcare
• Media
• Consumer
• Technology
• The Blackstone Group
• The Carlyle Group
• DT Capital Partners
• First Eastern Investment Group
• Hony Capital
• RMB fund
• Fundraising
• Fund formation
• China