By Mao Lijun (China Daily)

The establishment of a China-Singapore private equity (PE) fund, also called China-Singapore Hi-tech Industrial Investment Fund, is close to getting the go-ahead from the country’s top economic planner, China Daily has learnt from sources.

The fund is likely to become the country’s second industrial investment fund, supported by the China-Singapore Suzhou Industrial Park (SIP) China Council, chaired by Vice-Premier Wu Yi.

The only similar fund under operation is the Bohai Industrial Investment Fund, which is mainly invested in the Binhai New Area of Tianjin.

The SIP China Council reached an agreement with Singapore’s Deputy Prime Minister Wong Kan Seng in the ninth meeting of the SIP Joint Steering Council in July in Singapore to expand cooperation in SIP, a project between China and Singapore that was started in 1994 in East China’s Jiangsu Province and has become a model for other industrial parks in China.

The meeting, co-chaired by Wu and Wong, agreed to set new targets to steer the park toward a “hi-tech and high value-added economy”, said a statement from Singapore’s Ministry of Trade and Industry.

Now that Suzhou Industrial Park has decided to shift focus from simple manufacturing to hi-tech and high value-added industries, the China-Singapore PE fund is expected to facilitate the transformation.

Once approved, as expected, by the National Development and Reform Commission (NDRC), the fund will provide easier financial access for companies in the SIP.

The SIP Administration Committee had applied to the NDRC to raise 10 billion yuan, with 3 billion yuan for the first phase, according to a source.

“The fund will focus on hi-tech and business process outsourcing industries. Apart from the SIP, it will also seek opportunities in the Yangtze River Delta,” the source said.

China Life Insurance Co, the country’s largest insurer, and China Development Bank, the country’s top policy bank, are expected to be among the fund’s sponsors.

Experts said the China-Singapore PE fund is expected to follow a business model similar to that of the Bohai fund. Established in December with 20 billion yuan in capital, the Bohai fund provides funding channels for companies with difficulty accessing bank loans in Binhai New Area.

The ninth meeting of the SIP Joint Steering Council revealed the SIP’s income grew 18.8 percent in 2006, hitting 68 billion yuan, with $1.6 billion of utilized foreign direct investment.

It’s hoped that 75 percent of the park’s total industrial value would be created by hi-tech industries, according to the statement from Singapore’s Ministry of Trade and Industry.

“Technological upgrading will result in a better use of resources and the sustainable development of our park,” said Gu Yukun, vice-chairman of the SIP Administration Committee in the ninth meeting.

In an interview with Chinese magazine Outlook Weekly recently, Ma Minglong, chairman of the SIP Administrative Committee, said Suzhou was far behind Singapore in terms of growth in hi-tech and services sectors.

Wu Xiaoling, deputy governor of the People’s Bank of China, said in the First China International Private Equity Forum in Tianjin that the country should make greater efforts to develop private equity funds.

Copyright Fund China 2008.

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