Welcome to the 9th annual
AVCJ Private Equity & Venture Forum \ China

Chinese and foreign PE: on the dance floor or on a seesaw?

When the global financial crisis broke out in September 2008, credit contracted and leverage suspended overnight. The whole value chain, from fundraising to exit, was brought to an abrupt halt. As many headquarters of foreign funds struggled, questions about the future of their local offices in China emerged. The Chinese government responded promptly by mobilizing investments with its stimulus package and introducing new policies to encourage domestic and foreign investments, lowering entry barriers, stimulating internal demand and improving exit channels. With such efforts, as well as the warming of global economy and sustained interests of hot money in China, the country’s private equity market has seen a significant expansion of domestic funds and a recovering pool of foreign funds. Today, Renminbi funds are on the rise, and recent regulations are making the sail of foreign funds closer to move onshore. The launch of ChiNext has provided a new exit for venture capital. The “local fundraising, local investing, local exit” path is gradually taking shape. The crisis also helped distinguish the stronger, surviving market players from their counterparts. And we expect many more exciting observations to follow.

That said, doubts about the future continue to exist. The absence of channels for converting Renminbi earnings and remitting out of China remains a major challenge. The underdevelopment of domestic institutional investors, who are limited in social security funds and government guidance funds, has hindered the activeness of the China PE market. Meanwhile, problems associated with senior partner turnover have alerted LPs. Uncertainties further develop with the latest signs of the retreat of stimulus measures. Obama’s proposed bank regulations also cast shadows over the fate of the PE and VC arms of US banks.

The AVCJ Private Equity & Venture Forum in Beijing on 27-28 May will discuss how PEs and VCs in China will develop out of the above dynamics, and how LPs, GPs, corporations, entrepreneurs and service providers in this ecosystem should strategise proactively (or at least react tactfully!)