The government has given the go-ahead to four new industry investment funds worth 46 billion yuan.

The State Council approved the funds, which are a type of private equity (PE) fund. The Shanghai Financial Industrial Investment Fund will raise 20 billion yuan, the Guangdong Nuclear Power Industrial Investment Fund and the Shanxi Coal Energy Industrial Investment Fund 10 billion yuan each, and the Sichuan Mianyang High Technology Industrial Investment Fund, 6 billion yuan.

A China-Singapore Hi-tech Industrial Investment Fund was also recently approved to raise 10 billion yuan, with 3 billion yuan for the first phase.

The five funds are expected to provide financial support for firms and businesses in the energy, innovative manufacturing, hi-tech, high value-added and business process outsourcing industries.

“I believe there is the demand and conditions for China to develop PE funds,” said Liu Hongru, vice-chairman of the economic committee under the National Committee of the Chinese People’s Political Consultative Conference, at a summit in Xiamen on Thursday.

Analysts said the five funds will likely follow a business model similar to that of the Bohai Industrial Investment Fund, the country’s only industry fund, with start-up capital of 6 billion yuan and total capital of 20 billion yuan over 15 years.

Chen Zongsheng, chief of the preparatory group for the Bohai Industrial Investment Fund, said problems including a rigid registration and approval system for PE funds and fund managers’ lack of experience is hampering the development of PE funds in the country. “The development of PE funds in China will be even faster if these barriers are removed.”

The National Development and Reform Commission has said the only candidates for PE fund investment are State-owned financial firms including insurers, brokerage firms and commercial banks.

Source: China Daily

Copyright Fund China 2009.

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