Ex-Taiwan Official Becomes Boss of Chinese PE Firm

SHANGHAI/TAIPEI (Reuters) – Taiwan’s former deputy economics minister, Yang Shih-chien, now has a new business card — chairman of China Prosper Investment and Management (Tianjin) Co Ltd, a new yuan-denominated private equity fund manager.

The new fund, which sources said is still in the process of raising capital, will be mainly operated by Yang, a staunch ally of former Taiwan Vice President, Lien Chan, and is the latest sign that political and trade ties between the two foes have reached the highest level in decades.

“The launch of the fund marks a milestone for cross-strait relations, and it means Taiwan-China M&A deals will be accelerating,” said Andrew Deng, an assistant vice president of Taiwan International Securities.

“China’s private equity funds and venture capital funds should be permitted to invest in Taiwanese firms in the foreseeable future.”

Two Beijing-based state-owned enterprises — China Post Group and CITIC Group — are the main shareholders of the new yuan-denominated China Prosper fund, according to fund-raising documents seen by Reuters. 

Sources said Yang and his local partners aim to raise multiple billions of yuan for the fund in the initial phase, targeting Taiwanese and Chinese technology and financial services firms.

Once at the brink of war, Taiwan and China have recently sealed deals in shipping, tourism, financial services and several other areas since China-friendly President Ma Ying-jeou took office in 2008.

Taiwan formally announced rules this month to let local and Chinese financial institutions invest in each other, and political and economic analysts expected more investments to be made across the strait.

BEIJING SUPPORT

The establishment of China Prosper won support from the National Development and Reform Commission (NDRC), China’s top economic planning body, since Beijing wants to set an example to improve business ties with Taiwan in the private equity industry, according to people with direct knowledge of the matter.

The move makes Yang, who is well known in Taiwan’s political world and is also a nephew of former Chinese Vice President Rong Yiren, the most senior former Taiwan official to become a dealmaker on the mainland.

Yang, who quit all his government posts in 2000, founded China Prosper as an investment firm focusing on the Greater China region including Hong Kong, Taiwan and mainland China in 2008. Yang’s office in Taipei declined requests for comment.

Some Taiwan businessmen have moved to the mainland and raised small, low-profile venture capital funds in the past few years, but Yang’s multi-billion-yuan fund plan is set to encourage establishment of more, larger Taiwan-linked China funds.

China Prosper’s Taiwan operation has invested T$1.5 billion ($47 million) locally and another $79 million overseas, said a company official.

The sources interviewed by Reuters in Taiwan and China all declined to be identified due to the sensitive political nature of the matter.

POLITICAL CONNECTIONS

Once Yang registered the fund, Beijing’s NDRC quickly added it to a key list that helped China Prosper become qualified as a candidate to win capital commitments from China’s powerful National Social Security Fund, the national pension fund, said the sources.

This quick acceptance comes thanks largely to Yang’s local partners as well as the strong connections of Lien, who has headed several Taiwan delegations to meet Chinese President Hu Jintao and Premier Wen Jiabao, said the sources.

Shareholders China Post Group, which operates the nationwide postal service in China, and CITIC Group, China’s No.1 financial conglomerate, are directly led by the State Council, China’s cabinet.

“Lien Chan is widely seen in mainland China as a close friend of Hu Jintao,” said a source who has observed Lien for eight years. “In China, connections matter a lot.”

Yang helped the Liens manage part of their family wealth by investing through some of China Prosper’s private equity and venture capital funds, said the sources.

It is unclear whether Yang’s new Tianjin-registered yuan fund would receive money from the Liens.

Lien Hui-hsin, Lien’s eldest daughter, currently has a senior position in the Taiwan operations of China Prosper, sources said. Her office declined an interview request for this article.

By George Chen and Faith Hung
(Editing by Ken Wills and Lincoln Feast)