China encourages private investment in banking sector
China will allow private capital to invest in banks on an equal footing to other forms of capital. The move, which in theory will see substantial barriers to PE involvement in the industry, comes as the government opens up certain state-controlled and monopolized sectors in order to boost competition and support economic growth.
Under the new regulations, private capital will be able to participate in private stock placements, new share issues, equity transfers, and mergers and acquisitions concerning banks. This extends to trust, financial leasing and auto-financing companies, the China Banking Regulatory Commission (CBRC) said in a statement last Saturday.
The regulator added that it would support private companies listing on the stock market and issuing bonds.
"Bank regulators should encourage fair competition among different types of investors and should not set up separate restrictions or other additional conditions for private capital," the CBRC said. "Regulatory departments should release rules, policies and procedures concerning banking investments on time, in order to improve the transparency of the market constantly."
The CBRC also plans to reduce the minimum holding of the major investors in rural banks to 15% from 20%, with a view to encouraging involvement from private players.
In recent months, the Chinese government has also opened up the railway industry to private capital and plans to do the same in electricity as well as in oil and gas.
The State-owned Assets Supervision and Administration Commission said last Friday that private investors could also partiicpate in the restructuring of state-owned enterprises (SOEs) through cash investment, share stake acquisition, subscriptions to convertible bonds and finance leases. SOEs are also permitted to establish private equity funds in order to invest offshore and in strategic emerging industries.
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