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Establishing renminbi private equity funds
Over the past two years, domestic private equity investment has greatly increased but, as a result of coordination problems between departments and their supervisory authorities, the Administrative Rules on Private Equity Investment Management have not yet been released. The government is concurrently implementing pilot projects and draft administrative regulations on the subject.
Assembling an effective transaction team
Many foreign investors in China face difficulties in assembling a successful business project team to implement their project. As well as considering the best composition of an internal team, this update looks at the selection of external consultants: what roles do they play, how should they be selected - and are they really necessary?
If venture capital investment enterprises make an equity investment in private small and medium-sized high-tech and new technology enterprises for more than two years, they are entitled to a 70% deduction of the total investment in the enterprises from the venture capital enterprise's taxable income once the two-year period for the equity holding is reached.
A new State Council policy proposes to open more sectors to private investors. Before the promulgation of the policy, some of the industries were monopolized by state-owned enterprises and were virtual no-go areas for private capital. However, the successful implementation of these policies and incentives depends on clear implementing rules. Otherwise, private investors will be back to square one.
The State Council has published new foreign investment guidelines that will widen market access for investors, boost China's global competitiveness and promote investment in high-technology and environmentally sound projects. The move could be seen as a response to complaints that the government was reversing its foreign investment policies in the wake of high-profile matters involving Google and Rio Tinto.
A trial plan for foreign participation in renminbi equity investment funds, to be implemented in the Pudong New Area, could open a gateway for the conversion of foreign exchange into renminbi, which has been a major factor hindering foreign general partners and limited partners from becoming involved in the renminbi private equity fund industry.
