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China Launches $8B Fund for Overseas M&A

China has launched a 50 billion yuan ($7.93 billion) fund in Shanghai to aid overseas acquisitions by Chinese companies as part of efforts to promote international use the yuan, Reuters wrote Friday. The government-backed fund, Sailing Capital International, has a fundraising target of 50 billion yuan and has already raised 12 billion yuan, Reuters wrote.

(Reuters) – China has launched a 50 billion yuan ($7.93 billion) fund in Shanghai to aid overseas acquisitions by Chinese companies as part of efforts to promote international use the yuan and build the commercial hub into a global financial center.

The government-backed fund, Sailing Capital International, has a fundraising target of 50 billion yuan and has already raised 12 billion yuan, the Shanghai government said on its website.

It will eventually expand total funds available for investment to more than 150 billion yuan through leverages such as setting up subsidiary funds or issuing bonds, it said.

The fund will back Chinese companies’ overseas expansion through loans and equity investment, with the yuan as the preferred currency for pricing, transaction and settlement in cross-border investments.

Shanghai Vice Mayor Tu Guangshao said that launching the fund “meets Chinese companies’ strategic needs to venture out, and would also play an important role in building Shanghai into a center for asset management and cross-border investment denominated in yuan.”

In the aftermath of the 2007-2008 global financial crisis, China has been stepping up efforts to promote international use of the yuan in a bid to reduce reliance on the U.S. dollar, and has also been encouraging domestic companies to acquire crisis-hit foreign companies.

China has already been aiding such acquisitions through government-backed funds and commercial banks. For example, state-owned policy banks have invested in private equity funds such as Mandarin Capital Partners and Infinity Group to aid outbound investment.

Investors in the newly-launched Sailing Capital International fund include both state and non-state owned enterprises, listed firms and financial institutions, the Shanghai government said, without disclosing details.

According to a recently published blueprint, Shanghai, which is aiming to become a global money hub by 2020, is looking to double assets under management in the city to about 30 trillion yuan by 2015. ($1 = 6.3016 Chinese yuan) (Reporting by Samuel Shen and Kazunori Takada)