Private Equity in China: Challenges and Opportunities

CHAPTER 4

Renminbi Private Equity Fund

This chapter provides the reader with an in-depth understanding of a very popular topic among private equity professionals and private equity observers—the Renminbi (RMB) private equity funds. In addition to describing the intricacies of the RMB private equity fund from the fund-raising to exit stages, this chapter also provides a discussion of the opportunities, challenges, and future development of this fund. This is particularly useful for readers who want to understand how foreign private equity players have overcome barriers imposed by Chinese regulators and positioned their firms for the hurdles that still lie ahead. It is important to understand that this topic is time sensitive, as government policies are constantly being reviewed and adopted. Readers are advised to read with an open mind and to bear in mind that the RMB private equity funds are a relatively new and evolving development in the private equity industry in China.

OVERVIEW

The Renminbi (RMB) private equity fund broadly refers to any legal entity formed under PRC laws that purports to make RMB-denominated private equity investments in China. Private equity funds have been established in various legal forms in China such as trusts, limited liability companies, and limited partnerships. Other types of structures include investment management agreements and holding companies. Due to a variety of drivers and the attractiveness of the China market, the RMB fund has recently ...