China seeks PE assistance to help boost public markets

China’s GDP expanded by 6.5% in the third quarter, the slowest pace of growth since the global financial crisis. Other key economic indicators didn’t bode well either. Industrial output came in at 5.8%, the lowest quarterly total in three years, and fixed-asset investment reached 5.4% for the first nine months, up from the all-time low of 5.3% in August. Meanwhile, the Shanghai Composite Index plummeted to a four-year low last week. It is down 22% on a one-year basis.

Shiyu Liu, chairman of the China Securities Regulatory Commission (CSRC), told the state-owned Xinhua News Agency that the regulator plans to encourage private equity firms to launch new funds, either independently or in conjunction with local governments. These funds should be prepared to invest in listed companies through non-public stock issuance, stock transfers, and block share trades.

The announcement reflects growing concerns about widespread distress among companies that have pledged shares to secure loans from banks to meet their financing needs. A decline in the value of these shares means more collateral is required from the companies. As of June, more than 400 listed companies with pledges worth a combined RMB44 billion ($6.3 billion) had seen their share prices drop to levels that could trigger forced sales of stock, local media reported.

Separately, the Asset Management Association of China (AMAC) said on October 21 that it would expedite approvals for new fund launches by private equity firms that participate in M&A processes involving listed companies. Major markets such as Beijing, Shanghai, and Guangzhou previously imposed a ban on registrations of new GPs and funds – unless a manager has approval from a local finance bureau, which has become increasingly difficult to obtain.

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• Topics
• Greater China
• Regulation
• PIPEs
• China
• regulation
• CSRC