The Blackstone Group and First Eastern Investment Group have become the first international private equity firms to set up RMB-denominated funds in Shanghai – a significant development as the city vies with Beijing, Shenzhen, Tianjin, Hangzhou and Hong Kong to become China’s private equity hub.
Hong Kong-based First Eastern said it intends to manage RMB6 billion ($877 million; €622 million) of RMB-denominated funds in the next 12 months, while New York-headquartered Blackstone has said it will raise up to RMB5 billion for the Blackstone Zhonghua Development Investment Fund, a joint venture with the Pudong government.
The launches follow the introduction of a pilot policy in June that allows foreign private equity and venture capital firms operating in Shanghai's Pudong New Area district to set up wholly-owned Chinese entities.
In April, China’s State Council announced a twin-track plan to develop Shanghai into an international finance and shipping centre by 2010. International private equity players bolster Shanghai's position as a leading international financial centre, Xinghai Fang, director general of Shanghai Metropolitan Government’s office of financial services, said in a statement.
First Eastern said in a statement it is the first international private equity firm to incorporate a subsidiary in Shanghai. The funds it raises will invest in regional development and local environment protection projects.
Blackstone said last week its Blackstone Zhonghua Development Investment Fund will invest mainly in Shanghai and neighbouring areas.
Securing the joint venture with Blackstone “has given the Shanghai government a tremendous confidence booster” in its bid to become the country’s private equity centre, according to Hubert Tse, Shanghai-based Yuan Tai PRC Attorneys' managing director and head of international business group, who advised DBS Bank Private Equity on the formation of its $100 million on-shore RMB fund in Pudong this February.