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Prime Time For (Local) Private Equity

Private equity and venture capital are hot subjects in China (politically and commercially), so it was very interesting to attend the Zero2IPO China Venture Capital and Private Equity Forum [1]in London last week.

As the FT pointed our in a recent article, and as Liu Mingkang highlighted in his “Icebreaker Lecture” for The 48 Group Club [2]* at the Westminster Hearings [3]on 20 June, China needs more efficient bank financing and capital markets to help develop the private and high-tech sectors that will lead the ‘innovatisation’ of the economy. While private equity has a role in funding business, there has been a fear of foreign domination [4]of the sector.

Using policy as a tool (and as the government itself becomes a private equity player [5]), moves are being taken to promote and expand the role of local private equity, local Renminbi (RMB) fundraising, and exits via local (rather than foreign) IPOs. The FT reports:

Local private sector examples given by the FT (with offshore structures and foreign fundraising) include Legend Hony (sister company of Lenovo, which was previously also called Legend), and CHD Investments (which last year co-invested with Goldman Sachs to buy China’s largest food processor, Shuanghui Group). SUG partners, from Shanghai, is reported to be one of only a few firms to have already set up a local RMB fund.

These issues, and more, were covered in London last week, as the world of China private equity and venture capital came together for the Zero2IPO Forum [1]. A lot of speakers covered a lot of ground, so just a quick take-away selection follows:

Zero2IPO [8] has reams of research on private equity and venture capital in China. I hope to report some of their figures here in due course. In the meantime, here is a selection of the top funds and deals from 2006.

Top Venture Capital Funds of the Year in 2006 (top 5 of 50):

Top VC-backed Entrepreneurs of the Year in 2006 (top 5 of 10):

The next Zero2IPO forum is being held in Beijing on July 11th [9]. See here for details.

See news source:

* The author is Honorary Secretary, and a Committee Member, of the 48 Group Club