On June 10, Shanghai Pudong New Area launched a pilot policy on the establishment of foreign-funded equity investment management enterprises. It becomes the first region in China to allow foreign equity investment such as venture capital (VC) and private equity (PE) to register as equity investment management enterprises.

Following the launch of the pilot policy, all the foreign funded VC and PE companies already established in Pudong New Area can be re-registered as foreign-funded equity investment management enterprises. Pudong New Area hopes that this pilot reform will drive more foreign equity investment capital to enter China's domestic markets.

More foreign capital holders have become optimistic about the Chinese market in recent years, and have started to make direct investments by means of VC and PE. However, under existing policies, these companies have mainly been registered as investment consulting companies or representative offices, and their business scope was also limited.

As China's financial center, Pudong New Area has been home to over 70 foreign equity investment institutions. The contradiction between the business development of these financial institutions and the existing restrictive mechanism has become increasingly obvious.

According to the pilot policy, all foreign financial institutions that mainly engage in investment entrusted by equity investment enterprises as well as equity investment management, can register as foreign-funded limited liability equity investment management enterprises. The threshold of registered capital should be at least 2 million USD.

In order to control financial risks, it is stipulated that foreign-funded equity investment management enterprises should have at least one investor. The business scope of the investor and its related entity should contain either equity investment or equity investment management.

In addition, while applying for registration, this type of enterprise should have more than two executives with over two years experience in a senior managerial position in either equity investment or equity investment management.

By People's Daily Online