China onwards ever upwards

TPG was regarded, as sources confirm, as the perhaps-honorable holdout in the drive to set up RMB funds. Peers such as Blackstone and Carlyle stepped up with plans to float their own RMB vehicles, in partnership with PRC authorities, while TPG held back. Now that TPG has joined the pack, however, there seems to be little to no resistance to the thesis that every leading international player needs to be both in China and in the RMB fund ecosystem.

However, both the CIRC and the TPG news do little to dispel lingering doubts about actual performance, compared to expectations, of the PRC RMB fund system. China's insurers, despite the tremendous pools of assets at their disposal, will be coming to the private equity sector very much as first-time investors. And even if, as AVCJ sources affirm, private equity investment expertise is becoming an increasingly fungible commodity in China, it is hard to imagine them - or the other PRC institutions in line to join the roster of domestic PE LPs - launching well-managed and effective investment programs from the get-go.

And TPG, it seems, will be involved with the PRC government's plans to create the country's leading financial center in Shanghai, and to develop Chongqing and western China on a similar footing to state-supported initiatives in Tianjin and the Bohai Gulf region. The danger here is that such tieups may leave the GP vulnerable to the dictates of the Chinese authorities, the ultimate guarantors of deal access in China, with developmental priorities put ahead of actual value-driven profit-oriented investment. At least mainland RMB investors are likely to be the chief recipients of any resultant impact on the relevant RMB funds.

All the same, none of AVCJ's sources are maintaining that industry players can safely take a pass on the RMB fund environment. What they are saying, rather, is quite a different proposition: that China may be on track to overtake the US as the world's Number One private equity investment pool by value. For anyone who accepts the thesis that China is also on track to rival or overtake the US as the world's largest economy, as it has already surpassed Japan, the logic is self-evident. It may even be true.

 

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• Topics
• Renminbi fund
• Greater China
• TPG Capital