Primavera targets onshore China deals
Primavera Capital Group has established a fund under China's Qualified Foreign Limited Partnership (QFLP) regime, underlining interest in onshore investments among managers with US dollar-denominated pools of capital.
The fund in question - Primavera Venture Partners Fund I, which closed on USD 250m last year - has registered for QFLP in Changzhou, Jiangsu province, according to a government statement. The quota - or the amount of US dollars that can be converted into renminbi for onshore investments - is USD 100m.
In general, there are two ways for US dollar funds to participate in renminbi deals. First, the start-up changes its structure from a pure domestic entity to a joint venture that can accept renminbi and US dollars. Second, US dollars are converted into local currency through a QFLP quota. QFLP conversion happens at the fund level rather than the deal level; company founders can't necessarily tell the difference. The QFLP route is increasingly popular.
"There are indeed more and more people looking to use the QFLP channel, but few have exited through it. Compared to the JV structure, QFLP is a pilot program that has more uncertainty," said Mulong Gong, a Beijing-based managing partner at law firm King & Wood Mallesons in a recent interview "Its accessibility can vary based on foreign exchange regulations in different cities."
QFLP structures take more than six months to implement, compared to one or two months for JV structures. Even though it operates at the fund level, QFLP cannot access sensitive sectors because regulators look through the structure to the ultimate beneficial owners.
Primavera Venture Partners was established in 2020 to focus on earlier-stage investments in areas like artificial intelligence, healthcare, and climate.
The firm is also in the market with its fourth flagship US dollar-denominated fund seeking USD 4bn. It invests in China and in global companies that have a China angle. Fund III closed on USD 3.4bn. Primavera has broadened its geographic footprint in recent years, adding offices in Silicon Valley and Singapore to its bases in Hong Kong and Beijing.
In addition, the firm launched a carbon neutrality fund with a target of CNY 10bn (USD 1.5bn) and it is seeking USD 300m for a credit fund. Meanwhile, a special purpose acquisition company (SPAC) affiliated with Primavera recently merged with Lanvin Group, a luxury fashion platform established by Fosun Group.
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