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Corporate governance becoming key consideration for China PE industry, says study

The quality of investments is becoming more important for the private equity industry in China, according to a joint study from Deutsche Borse and CMS Hasche Sigle.

As a result of the slowing Chinese economy, of closed IPO exit channels and of the increasing competition in many sectors of the economy, the level of corporate governance of the companies can make the difference between good and mediocre returns.
"The times where companies could be sold with high multiples due to the China growth phantasy are definitely over,” says Alexander von Preysing, deputy head of issuer & primary market relations at Deutsche Börse.
Fund managers which want to differentiate themselves see the adherence to stringent corporate governance as a key topic to add value during their investment cycle. Many fund managers would welcome a more rigorous approach to implement international corporate governance standards.
"It is still a long way to go but Chinese entrepreneurs will sooner or later understand that the rules of the capital markets have unavoidably to be complied with,” says Volker Potthoff from CMS Hasche Sigle.

The private equity and venture capital industry in China is facing a more challenging environment. Fund raising of the PE/VC market has declined to USD7.8bn in H1 13 from USD18.5bn in H1 12 and USD16.2bn in H2 12. The fundraising of US-dollar funds was particularly negatively affected. 

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