Foreign Private Equity in China: Challenges and Opportunities Under Chinese Legal Environment

Research Article
Open access

Foreign Private Equity in China: Challenges and Opportunities Under Chinese Legal Environment

Yijia Fang 1*
  • 1 University of Toronto    
  • *corresponding author Yijia.fang@mail.utoronto.ca
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/13/20230714
AEMPS Vol.13
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-69-0
ISBN (Online): 978-1-915371-70-6

Abstract

As the world's second largest economy, China’s private market is attractive to investors around the world. The legal environment in China can be one of the major concerns for foreign investors who are interested in investing in the Chinese capital market. With enough knowledge on how foreign private equity firms operate in China, unnecessary loss can be easily avoided. This article analyzes opportunities and challenges that foreign pri-vate equity investors would face by looking over structures of PE and the legal environ-ment in China. From a historical perspective, the restrictions on foreign equity investors are gradually removed by the Chinese government, so investing in the Chinese private market overseas is now much more viable. Since 2020, foreign-owned private equity funds can be freely established in mainland China after a series of applications. Under this trend, the Chinese private market is expected to encourage more foreign investors to enter which also brings international investors more potential opportunities.

Keywords:

China, private equity, foreign private equity, venture capital

Fang,Y. (2023). Foreign Private Equity in China: Challenges and Opportunities Under Chinese Legal Environment. Advances in Economics, Management and Political Sciences,13,249-255.
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References

[1]. Bruton, Garry D., et al. “Private Equity in China: Differences and Similarities With the Western Model.” The Journal of Private Equity, vol. 2, no. 2, 1999, pp. 7–13. JSTOR, http://www.jstor.org/stable/43503208. Accessed 15 Sep. 2022.

[2]. Ahlstrom, D., Bruton, G.D. & Yeh, K.S. Venture capital in China: Past, present, and future. Asia Pacific J Manage 24, 247–268 (2007). https://doi.org/10.1007/s10490-006-9032-1.

[3]. Times, Global. “Bridgewater's China Unit Becomes First Foreign Asset Manager to Hit 10b Yuan Mark.” Global Times, https://www.globaltimes.cn/page/202112/1241392.shtml?id=11.

[4]. “Gross Domestic Savings (% of GDP) - China.” Data, https://data.worldbank.org/indicator/NY.GDS.TOTL.ZS?locations=CN.

[5]. Yong, Kwek Ping. “Private Equity in China: Challenges and Opportunities.” Private Equity in China, 1. Aufl., Wiley, 2012, pp. xvii–xvii.

[6]. Zhang, Hongyuan. Analysis of the Legal and Regulatory Problems in the Development of Foreign Private Equity in China in a Comparative View to the Private Equity Industry in the Uk and the U.s. ProQuest Dissertations Publishing, 2015.

[7]. Bova, Francesco. “Discussion of ‘Avoiding China’s Capital Market: Evidence from Hong Kong-Listed Red-Chips and P-Chips.’” Journal of International Accounting Research, vol. 17, no. 2, 2018, pp. 37–39, https://doi.org/10.2308/jiar-10624.

[8]. Qinhua Wang (2017) The Management of Foreign Private Equity Funds Involves Foreign Investment and Foreign Exchange in the China (Shanghai) Pilot Free Trade Zone, The Chinese Economy, 50:4, 249-258, DOI: 10.1080/10971475.2017.1321887.

[9]. Jingu, Takeshi and Kamiyama, Tetsuya, China's Private Equity Market (October 17, 2008). Nomura Capital Market Review, Vol. 11, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1290512.

[10]. Wang, Qinhua. “The Management of Foreign Private Equity Funds Involves Foreign Investment and Foreign Ex-change in the China (Shanghai) Pilot Free Trade Zone.” The Chinese Economy, vol. 50, no. 4, 2017, pp. 249–58.

[11]. Lawrence Zhan Zhang, The Legal Environment For Foreign Private Equity Firms In China, 16 Fordham J. Corp. & Fin. L. 839 (2011). Available at: https://ir.lawnet.fordham.edu/jcfl/vol16/iss4/4.

[12]. Song, Yuegang, et al. “Venture Capital and Chinese Firms’ Technological Innovation Capability: Effective Evaluation and Mechanism Verification.” Sustainability, vol. 14, no. 16, Aug. 2022, p. 10259. Crossref, https://doi.org/10.3390/su141610259. https://doi.org/10.1080/10971475.2017.1321887.

Cite this article

Fang,Y. (2023). Foreign Private Equity in China: Challenges and Opportunities Under Chinese Legal Environment. Advances in Economics, Management and Political Sciences,13,249-255.

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About volume

Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies

ISBN：978-1-915371-69-0(Print) / 978-1-915371-70-6(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.confbps.org/
Conference date: 26 February 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.13
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Bruton, Garry D., et al. “Private Equity in China: Differences and Similarities With the Western Model.” The Journal of Private Equity, vol. 2, no. 2, 1999, pp. 7–13. JSTOR, http://www.jstor.org/stable/43503208. Accessed 15 Sep. 2022.

[2]. Ahlstrom, D., Bruton, G.D. & Yeh, K.S. Venture capital in China: Past, present, and future. Asia Pacific J Manage 24, 247–268 (2007). https://doi.org/10.1007/s10490-006-9032-1.

[3]. Times, Global. “Bridgewater's China Unit Becomes First Foreign Asset Manager to Hit 10b Yuan Mark.” Global Times, https://www.globaltimes.cn/page/202112/1241392.shtml?id=11.

[4]. “Gross Domestic Savings (% of GDP) - China.” Data, https://data.worldbank.org/indicator/NY.GDS.TOTL.ZS?locations=CN.

[5]. Yong, Kwek Ping. “Private Equity in China: Challenges and Opportunities.” Private Equity in China, 1. Aufl., Wiley, 2012, pp. xvii–xvii.

[6]. Zhang, Hongyuan. Analysis of the Legal and Regulatory Problems in the Development of Foreign Private Equity in China in a Comparative View to the Private Equity Industry in the Uk and the U.s. ProQuest Dissertations Publishing, 2015.

[7]. Bova, Francesco. “Discussion of ‘Avoiding China’s Capital Market: Evidence from Hong Kong-Listed Red-Chips and P-Chips.’” Journal of International Accounting Research, vol. 17, no. 2, 2018, pp. 37–39, https://doi.org/10.2308/jiar-10624.

[8]. Qinhua Wang (2017) The Management of Foreign Private Equity Funds Involves Foreign Investment and Foreign Exchange in the China (Shanghai) Pilot Free Trade Zone, The Chinese Economy, 50:4, 249-258, DOI: 10.1080/10971475.2017.1321887.

[9]. Jingu, Takeshi and Kamiyama, Tetsuya, China's Private Equity Market (October 17, 2008). Nomura Capital Market Review, Vol. 11, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1290512.

[10]. Wang, Qinhua. “The Management of Foreign Private Equity Funds Involves Foreign Investment and Foreign Ex-change in the China (Shanghai) Pilot Free Trade Zone.” The Chinese Economy, vol. 50, no. 4, 2017, pp. 249–58.

[11]. Lawrence Zhan Zhang, The Legal Environment For Foreign Private Equity Firms In China, 16 Fordham J. Corp. & Fin. L. 839 (2011). Available at: https://ir.lawnet.fordham.edu/jcfl/vol16/iss4/4.

[12]. Song, Yuegang, et al. “Venture Capital and Chinese Firms’ Technological Innovation Capability: Effective Evaluation and Mechanism Verification.” Sustainability, vol. 14, no. 16, Aug. 2022, p. 10259. Crossref, https://doi.org/10.3390/su141610259. https://doi.org/10.1080/10971475.2017.1321887.

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