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Shanghai OKs Blackstone Carlyle, DT Capital For Yuan-denominated PE Funds

The Shanghai government gave the green light to Blackstone, Carlyle Group and DT Capital Partners for a pilot scheme that allows foreign investors to invest in yuan-denominated private equity funds in China for the first time, Reuters reported citing sources.  Shanghai is vetting a second batch of applicants. Two sources with direct knowledge of the matter told Reuters that the Shanghai government hopes to award QFLP status to other types of foreign investors, such as venture capital funds, with a preference to those co-invested by Chinese companies.

(Reuters) – The Shanghai government is vetting a second batch of applicants for its pilot scheme that allows foreign investors to invest in yuan-denominated private equity funds in China for the first time, after giving the green light to Blackstone, Carlyle Group and DT Capital Partners, sources said on Friday.
Under the new Qualified Foreign Limited Partners (QFLP) programme, foreign private equity firms will be allowed to launch yuan funds in China using overseas capital.

In addition to major buyout funds, the Shanghai government hopes to award QFLP status to other types of foreign investors, such as venture capital funds, with a preference to those co-invested by Chinese companies, said the two sources with direct knowledge of the matter. They declined to be identified because they are not allowed to speak to the media.

More than 50 foreign private equity firms, including Blackstone, Carlyle and TPG have set up subsidiaries in Shanghai, where the government is encouraging them to launch yuan-denominated funds to help channel money into the private sector and improve corporate governance Of local firms.

The QFLP scheme, which will also be adopted by Beijing and Tianjin, allows overseas investors to convert dollars into yuan for private equity investment in China under a certain quota, bypassing a procedure that requires obtaining approval from the country’s foreign exchange regulator on every deal they make.

However, these transactions would still require approval from the Ministry of Commerce, keeping foreign funds at a disadvantage to their local rivals. (Reporting by Samuel Shen, David Lin and Kazunori Takada)