AVCJ

VIDEO: CNEI's Xiaoyang Yu

  • Anita Davis
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Xiaoyang Yu, founding partner of growth-focused China New Enterprise Investment (CNEI), says that crowding and a lack of transparency are among the key challenges facing the private equity industry in China. She insists that, when it comes to due diligence, “international standards are not there”

Yu tells AVCJ TV that CNEI circumvents these issues by digging deeper into each of companies' books before investing, going beyond financial statements to examine receivables and invoices and implement "forensic accounting" processes to create clarity.

Uncovering potential targets has also become a challenge given the heightened competition in the market. "I think the Chinese market has become a little bit crowded - actually I wouldn't say it's crowded, it's a little bit chaotic because there are so many different players coming into the market, especially there are a lot of new funds coming in and they have very different kinds of standards and mindsets," she says.

For those looking to best position themselves for the opportunities that come along, Yu advises investors to raise sector-agnostic funds which can adopt to the trends. "China is evolving and developing so rapidly and industry lifecycles are so much shorter than our fund lifetime," she says. "We think that the flexibility is important."

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