Shanghai to allow PE funds to raise RMB for overseas investment

The program is still under preparation, Xinghai Fang, director-general of the Shanghai Municipal Office of Financial Services, told The Wall Street Journal. To participate in the program, funds will be required to register in Shanghai.

It is part of the central government's effort to relax controls on cross-border capital flows and to internationalize the currency. The People's Bank of China has first launched a trial program under which local companies could settle overseas trade in local currency three years ago. It has since been expanded to include the rest of the country. Last year, renminbi trade settlements exceeded RMB2 trillion ($318 billion), or 10% of the country's total trade value.

There are no clear rules regarding PE participation in outbound investment and only a handful of private equity funds have received regulatory approval to operate overseas. So far, the majority of outbound deals are still driven by state-owned enterprises (SOEs), with the likes of China Development Bank and provincial government bodies participating heavily.

In February, Shanghai launched a RMB50 billion fund, known as Sailing Capital International, to aid overseas acquisitions by Chinese companies. The fund, which is the largest international renminbi-denominated vehicle ever created, has already raised RMB12 billion.

The fund is expected to leverage its size to over RMB150 billion via bond issuance or setting up subsidiary funds. It is expected to support government efforts to promote the use of renminbi for pricing, transaction and settlement in cross-border investments.

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• Topics
• Greater China
• Regulation
• Fundraising
• China
• Outbound investment
• regulation
• Renminbi
• Fundraising