Foreign-invested PE Business Facing New Opportunities in China

Boao Forum for Asia Annual Conference 2018 convened in April has announced that China will substantially broaden the market access including the financial sector. Guided by such policy, it is expectable that the business environment for foreign investors to practice private equity investment/management (“PE Business”) in China will be further optimized, taking into consideration of the relevant regulations published or updated recently in various regions.

Compared with the Pilot Programs for foreign-invested investment/management enterprises published successively by Beijing, Shanghai, Tianjin and Shenzhen from 2011, there’re some new trends in this field within the past three years along with the reform of approval system for the establishment of foreign enterprises and the administrative approaches regarding the settlement of the foreign exchange capitals, as well as the strengthened supervision on PE Business by Asset Management Association of China (“AMAC”).

●Although the pre-approval by Financial Services Office is still a necessary step for setting up a foreign-invested equity investment/management enterprise, the pre-approval by Commission of Commerce has been replaced by the post-filing procedure, except for the industries involving special management measures prescribed by the State. Applicants can go through the registration directly at Administration for Industry and Commerce with the approval from Financial Services Office.

●The capital contributed by the foreign investor may be freely convertible currency, lawful RMB proceeds, as well as offshore RMB as prescribed by some regions. Meanwhile, the settlement of the foreign exchange capitals has been reformed nationwide based on pilot program in some regions. Except for the transfer of equity investment payments in their original currencies, a foreign-invested VC/PE is allowed to directly settle its foreign exchange capital or transfer the RMB funds under its Account for Foreign Exchange Settlement Pending Payment to the account of an invested enterprise according to the actual amount of investment.

●There are more ways for foreign investors to participate in the PE Business in China, including but not limited to, raise PE funds from domestic or overseas investor by foreign-invested PE management enterprises, manage domestic PE funds or foreign-invested PE funds by foreign-invested PE management enterprises, subscribe PE fund raised by domestic PE management enterprises, entrust domestic PE management enterprises to manage the existing foreign-invested PE, etc.

●The registration of foreign-invested PE management entity and filing of foreign-invested PE fund at AMAC within time limit have been supplemented in some relevant regulations published recently to connect the supervision by AMAC on the PE Business. AMAC has also organized the first Licensing Examination in English for Foreign Fund Practitioners on May 4.

●A number of regions have promised to simplify the administrative process through unified business window or open green channel to attract the foreign-invested PE and promote the business environment continuously.

Wang Yang

Partner

T：+8610 66578066

E：wangyang@guantao.com