Hony bets on China convertibility experiment
Hony Capital is set to become the first private equity player to enter the Shenzhen-Qianhai new business zone, a pilot project for greater renminbi convertibility. John Zhao, Hony’s CEO, said the company may raise its next renminbi-denominated fund in Hong Kong, and invest it in China.
Qianhai, located in Shenzhen, permits for more flexible currency movements and cross-border renminbi transactions between Hong Kong and China. As part of the experiment, any private equity firm registered in the zone will be allowed to raise a local currency fund from Hong Kong.
"Operating in Qianhai could allow us to relatively freely raise and invest capital across the border, subject to certain regulations," Zhao told The Wall Street Journal. "Our goal is to help build Qianhai into a global hub for private-equity firms in five to 10 years."
Details are yet to be worked out, but the plan is also said to allow foreign funds in Qianhai to complete deals with local fund managers without approvals from China's Ministry of Commerce. Renminbi funds raised elsewhre by the likes of The Blackstone Group and TPG Capital must still undergo longer approval processes compared to their fully domestic counterparts.
According to Reuters, Blackstone and KKR are among the global private equity funds that have held early talks with the authorities to participate in this trial program.
The government wants the 15 square-kilometer Qianhai zone to have basic infrastructure by 2015 and become a major international services center by 2020.
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