New Chinese investment rules greatly expand investment opportunities in China for foreign investors and also allow for additional sources of capital for RMB-denominated funds, says law firm Debevoise & Plimpton.
Until now, sponsors raising RMB-denominated funds have practically been required to raise capital solely from Chinese investors. New proposed rules will change this.
Debevoise & Plimpton says it has confirmed with a source in Shanghai that the Shanghai Municipal Government has received approval in principle from China’s finance authorities to launch a pilot programme for qualified foreign limited partners to invest in China’s private equity and venture capital markets.
According to news reports, the Beijing and Tianjin governments have also applied to participate in the programme but have not yet received approval. Detailed rules implementing the programme are being drafted and are expected to be promulgated by early November.
Debevoise & Plimpton says that under the proposed terms of the programme, foreign institutional investors meeting certain criteria may, after undergoing an approval process and obtaining a currency conversion quota, convert foreign currency into RMB and make equity investments in Chinese domestic RMB-denominated funds.
According to the guidelines for the programme and subject to the implementing rules, the programme would allow domestic RMB-denominated funds with no more than 50 per cent (a percentage subject to final approval) of capital from QFLPs to be treated as domestic funds not subject generally to foreign investment restrictions or investment approval processes.
