Chinese Outbound PE Fund Gets Okay

Chinese buyout shop A-CAPITAL has gotten the go-ahead from the Beijing municipal government to set up what it says is China’s first yuan-denominated outbound private equity fund, Reuters reported. The new fund will jointly invest with Chinese groups in European companies with an emphasis on technology, major brands, and carving out new markets, Reuters wrote. The firm, based in Beijing, already has a euro-denominated fund focused on China-Europe investments. The firm hopes to have a total of 3 billion yuan ($456 million) to invest.

(Reuters) – Private equity firm A-CAPITAL has signed a memorandum of understanding with the Beijing municipal government to set up what it says is China’s first yuan-denominated outbound private equity fund.

The Beijing-registered fund will jointly invest with Chinese groups to pursue investment opportunities in Europe with an emphasis on technology, major brands and carving out new markets, A-CAPITAL said in a statement.

A-CAPITAL already has a euro-denominated fund dedicated to China-Europe cross-border investments. The new venture, which needs central government approval, will give it the opportunity to raise capital directly in yuan, also known as the renminbi (RMB).

With the money it hopes to raise in local currency, the firm would have a total of 3 billion yuan to invest, said Andre Loesekrug-Pietri, chairman of A-CAPITAL.

He said the fund’s strategy would be modelled on the stake A-CAPITAL took alongside Chinese conglomerate Fosun when they bought into French leisure group Club Mediterranee (CMIP.PA) last year.

Club Med has since opened its first resort in China. [ID:nTOE6BF03J]

“What we are looking for is companies that are profitable and don’t necessarily need money but see a strategic interest of having a Chinese investor in their equity structure,” Loesekrug-Pietri told Reuters.

A-CAPITAL’s move follows agreements signed with the Beijing government last year by the Carlyle Group and NYP Capital to set up yuan-denominated inbound private equity investment funds.

“RMB funds have been developing very much during the last two years. But this is the first one that is not investing into China, which is getting more and more difficult because of the hot-money issue,” Loesekrug-Pietri said.

The Chinese authorities are on the alert for speculative capital seeking a way into China to ride on the coat tails of a rising yuan.

As part of the agreement, A-CAPITAL said the Beijing Municipal Government would provide it with access to leading private and state-owned companies in Beijing as well as to major institutional investors in the Chinese capital.

For Beijing the tie-up is part of its drive to promote the financial services industry in the city.

Tianjin, a thriving port city close to the capital, is also making a big push into financial services. [ID:nL3E7E40DP]

Huo Xuewen, head of the Beijing Municipal Bureau of Financial Work, said in A-CAPITAL’s statement that he hoped the deal would attract more European private equity funds to Beijing. (Reporting by Alan Wheatley, Global Economics Correspondent; Editing by Greg Mahlich)