China fund to support cross-border M&A

A Shanghai-based RMB fund is the latest government move to encourage Chinese companies to make acquisitions abroad.

China has launched a 50 billion yuan (€6 billion; $7.93 billion) fund in Shanghai to assist companies with overseas acquisitions, according to local reports. 

The fund will be run by Sailing Capital International, which was set up by government-owned Shanghai International Group and other investors.

“The yuan-backed fund will help domestic companies go abroad in seeking more investment opportunities,” Liu Shiyu, deputy governor of the People's Bank of China is quoted as saying in the Shanghai Daily. “The rapid development of cross-border yuan business in recent years has laid the backbone for capital like Sailing's to sail along.”

Cross-border M&A in China appears to be a trend gathering momentum. 

Hony Capital’s John Zhao told sister title PE Asia that the firm’s new US-dollar denominated fund, which closed late last year on $2.37 billion, will emphasise cross-border investments.

Sailing Capital International fund also represents another step toward internationalisation of the yuan. Since January 2011, China's central bank has allowed companies to use the yuan in outbound direct investment.