 China's fund center
By Wang Yu (China Daily)
Updated: 2008-09-27 09:26
From establishing the first private equity fund to getting the approval to set up a shipping industrial fund, Tianjin has become the pilot city winning most fund approvals from the State. In April 2008, the first overseas Chinese invested fund was set up in the Binhai New Area of Tianjin. In June 2008, more than 500 private equity fund companies from all over the world gathered in Tianjin and took part in "speed dating" with more than 2,000 domestic enterprises. In August, the National Development and Reform Commission approved Tianjin's application to prepare for a shipping industry fund. According to experts, the 20-billion-yuan shipping industrial fund will strengthen Tianjin's shipbuilding capability and capacity to transport cargo for Chinese companies. The fund will fuel the financing system for China's shipbuilding industry, and facilitate the formation of international shipping and logistic centers. Tianjin has been pinpointed to develop a private equity fund center in China. The city is taking action and perfecting policies and measures to attract fund enterprises. So far, there are more than 100 equity and venture capital funds in Tianjin. The city is now advancing to become China's fund center with financial innovation advantages entrusted by the Chinese government. In 2006, the State Council approved Tianjin Binhai New Area to lead the national comprehensive reform and experimental development and encouraged it to carry out financing reform and innovation. Therefore, any significant reform of financial enterprises, businesses and markets can be first tested in Tianjin Binhai New Area.
In May 2008, the National Development and Reform Commission issued a policy to support Tianjin's efforts to develop equity investment funds. In developed countries, due to the relatively mature fund and capital market, the proportion of direct financing can reach 50 percent or even higher. But in China the ratio is only 10 percent. The problems arising affect the healthy development of the economy - businesses, especially SMEs having financial difficulties, so that they cannot obtain capital effectively. The high proportion of bank loans in financing leads to a concentration of risks. Social funds are hard to be transformed into capital due to excessive liquidity. Therefore expanding direct financing channels has becoome an extremely urgent task in the country, and it has become a priority for the Binhai New Area to make innovation in financial reform. At the end of 2006, the first Chinese-invested industry investment fund - the Bohai Industrial Investment Fund - was set up in Tianjin. A year later, this fund signed its first deal - to invest in Tianjin Pipe Group Corporation with about 1.5 billion yuan to fuel the development of this national backbone industry. At the end of 2007, the largest domestic government's venture investment guiding fund - Binhai New Area Venture Investment Fund - was set up. With an investment of 2 billion yuan, the fund adopted the pattern of a "parent fund". It focuses on attracting domestic and foreign venture capital organizations with mature management experience to the Binhai New Area, hoping to stimulate 50 billion yuan in direct investment. According to the data provided by Tianjin finance service office, there are dozens of private equity funds in Tianjin now in addition to the industry investment fund approved by the State Council. The Tianjin municipal government is promoting exchange and cooperation between funds and enterprises. The first China International Private Equity Forum (CIPEF) was held in Tianjin. The second CIPEF was in June 2008, attracting 500 fund companies and 2,000 enterprises. The first self-regulatory organization of China's equity investment fund - the Association of Tianjin Private Equity Fund - was established in 2007. Its main functions include the development of self-discipline regulations, supervision and inspection of members, to stop improper completion, and to hold investor education, etc. According to experts' analysis, the emergence of the fund center will gather capital from home and abroad, attract a large number of enterprises to settle in Tianjin, and bring Binhai New Area into an era of financial innovation through the interaction of capital and industry. (China Daily 09/25/2008 page14) |
