VIDEO: Paul Strecker of Shearman & Sterling

"Given the RMB6 trillion worth of potential investments that the Chinese insurance industry represents - and around 10% of that amount may be invested in offshore funds - this is a significant development for international funds to raise capital. I think ultimately around $10-20 billion capital can be invested in the relatively near term," he says.

While the new regulation is certainly good news for offshore private equity investors, Strecker added that other Chinese regulatory hurdles should not go ignored.

For example, two court rulings have questioned the net profit guarantee that underpins many private equity and venture capital investment agreements. Subsequently, various value adjustment mechanisms and contractual agreements which were designed to incentivize entrepreneurs and offer down-side protection are now under threat.

"It certainly gives investors a pause to question whether or not the courts will deem those provisions to be enforceable," Strecker points out. "I think it puts into emphasis that investors may need to structure their deals offshore instead of being governed by PRC laws."

With respect to the recent take-private trend involving US-listed Chinese companies, Strecker says poor trading in the US, low liquidity, sour investor sentiment and negative analyst coverage will continue to be driving factors. However, the availability of debt and equity financing will be the main challenge.

"Bank's funding and leverage have lifted their bars in terms of what they are expecting for financing performance," he adds. "The connections between the consortium and the founder with the PRC banks will be an important factor to whether or not their financing is available."

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