Beijing welcomes foreign buyouts

Foreign Trade

7 June 2007

Beijing is prepared to accept foreign equity groups, following a new law that came into effect last Friday which established a legal framework for private equity and venture capital funds in China, the Financial Times reported. The law encourages dom­estic and foreign private equity groups to use a Cayman Islands-registered offshore structure, and removed a rule that imposed taxes on partnerships and their individual part­ners, allowing large investors in investment funds to enjoy limited liability. “We hope foreign private equity can make more use of the RMB (renminbi) market and develop more RMB-denominated funds," said Wu Xiaoling, deputy governor the central bank. Private equity investment in mainland companies has been down from 2006 levels since a law introduced last fall blocked an offshore structure used by most domestic and foreign private equity firms.