Qianhai zone to offer freer capital movement
Updated: 2013-01-25 06:44
By Sophie He(HK Edition)
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An artist's impression of Shenzhen's Qianhai district. Provided to China Daily |
Qianhai's development as a special financial zone can benefit Hong Kong's private equity industry as it will provide a platform for fund managers to move capital around more easily, said PE fund managers.
Cross-border yuan loans from Hong Kong to Shenzhen's Qianhai district, a 15-square-kilometer financial pilot zone, are now permissible, according to a new rule unveiled earlier by the People's Bank of China in Shenzhen .
Although mainland media reports state that the permission is subject to certain criteria such as allowing the use of loans by Shenzhen from Hong Kong only for Qianhai's development, PE fund managers view this development as offering various opportunities.
Qianhai is one of many initiatives or platforms for US dollar fund managers to channel yuan into the mainland, Edwin Wong, managing partner and chief investment officer at SSG Capital Management (HK) Ltd, told a briefing in Hong Kong on Thursday.
Wong said that if one wants to be a big and successful investor on the mainland, he must have yuan capability, as it would be much faster for business owners on the mainland to get the money they need. Thus they would choose yuan fund managers over US-dollar ones, assuming they are paying for the same valuation.
Qianhai offers an opportunity for US dollar fund managers to try to either go onshore or find ways to at least channel their money onshore, he said.
"I was told that a few leading local yuan funds have already set up offices in Qianhai," said Vincent Chan, chief executive at Spring Capital Private Equity.
Chan pointed out that the reason Qianhai stands out from other "special financial zones" on the mainland is that it is located near Hong Kong, and a huge amount of offshore yuan is parked in the city.
If fund managers raise some of the offshore yuan in Hong Kong and they are able to invest them in domestic funds through Qianhai, without going through the whole process of getting government approval, it would be a breakthrough for the industry, said Chan.
The fundraising and investment of private equities are noticeably slower in China during 2012, a result of capital funds growth raised on the premise of strong IPO exits retreating from the market, according to Asian Venture Capital Journal.
Data shows that fund raising on the mainland plummeted 51.3 percent to $23.4 billion in 2012, while investment on the mainland was $21.8 billion, down 27.5 percent year-on-year, with only over 500 deals completed, down from more than 800 in 2011.
But institutional investors are still interested in the region and they are willing to put their money into Asia, especially China, said David Pierce, chief executive at Squadron Capital Advisors.
Institutional investors like to see economic growth, and the mainland is still expected to deliver a significant economic growth in the future, said Pierce.
Meanwhile, the mainland capital market is relatively suited to private market activities, as the public market opportunities are relatively limited as many companies there are state controlled enterprises and they are unlikely to be the fastest growing sectors, so institutional investors prefer to enter the private market through funds in order to capture the growth, he added.
(HK Edition 01/25/2013 page2)