Private Equity

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					Private Equity
A Case Study
Abstract In recent years, foreign private equity fund investment of Chinese enterprises
has attracted wide attention.
This paper uses case study method, outside of private equity funds to avoid the
Chinese government on foreign investment in particular
Restrictions on various industries, and how to avoid the Chinese
government's capital controls were analyzed. For trying to actual
Facilities in terms of Chinese companies listed overseas, they can help in private
equity funds, through the red chip mode
Shanda mode and method of outside option mode to avoid government regulation; for
trying to invest in A-share listed companies in the environment
Foreign private equity funds, they can route through foreign banks or underground
banks, shareholders loans, third-party
Ownership, equity real fake bonds, the acquisition method of domestic investment
companies to avoid government regulation. Article, the main conclusion is that
The Chinese government's industry regulation and capital controls are not
as effective as we imagine, the Chinese government should Solution
In addition to the control of certain state-owned monopolies, strengthen the real
control of strategic industries, particularly not
Simply relax controls on capital outflows.
Keywords private equity to avoid government control of capital controls case
1 Introduction
Private Equity (Private Equity, PE) can be called on the international capital markets
in recent years, the concept of one of the most fiery.
According to the British investigative bodies Private Equity Intelligence's
statistics, as of February 2007, the global total of 950
Only the PE, the direct control of the 440 billion U.S. dollars of funds, this year, may
exceed 500 billion U.S. dollars in the so-called private equity .1
The right investment is not listed on the company's equity investment,
business intermediation by private equity funds can be used to develop
1 The above figures quoted id = 2145161.
New products or new technologies, increase working capital, for mergers and
acquisitions, or enhance their balance sheet, etc. .2 Canton
Meaning of the private equity investment, including initial public offerings on the
enterprise (Initial Public offering, IPO) stages before
Equity investments, including venture capital (Venture Capital, VC), leveraged
buyouts (Leveraged Buyout,
LBO) and pre-IPO (PreIPO), and even non-listed companies issued public orientation
Investment on Public Equity, PIPE). Narrow private equity financing usually listed
before, immediately issued
Development is relatively mature, ready for IPO in the next few years, the equity
investment business. Once the listing of business success,
Through certain lockout period, investors can sell shares in the secondary market
rewarded. This in private
Department offering the right investments are narrow concept.
Private equity funds (Private Equity Fund) is the direct investment by private
companies (Private Equity
Firm) management, to strategic investor (Strategic Investor) the role of active
involvement in investment management and change the subject
Made to the fund. Such funds as venture capital, as will investment in unlisted
emerging companies, looking through investment targets
IPO windfall. In addition to those who find themselves in financial difficulties will
also be listed companies with the goal, they will obtain such on
City's dominance, and usually it will be privatized (delisting), let go after
the re-transformation of the windfall.
3 within the current global best-known private equity funds, including the two major
categories, is a professional private equity investment opportunities
Structure, such as KKR, Blackstone (BlackStone), Carlyle (Carlyle), Texas Pacific
Group (TPG), etc.
The other is the world's leading investment banks and financial institutions
affiliated private equity funds such as Morgan Stanley, Goldman Sachs,
Citibank and HSBC's private equity fund.
In China, the emerging market economies, the Chinese enterprises in developed
countries compared to enterprises with a higher
Growth, which naturally led to strong foreign interest in private equity funds. In
recent years, foreign private equity fund investment
Well-known Chinese enterprises are numerous cases, such as Newbridge Capital
investment in Shenzhen Development Bank, Harbin Pharmaceutical Group, Warburg
Pincus, Morgan
Stanley Investment Mengniu, Goldman Sachs Suntech, Blackstone Blue Star Group.
Offshore private equity fund investment
In Chinese enterprises, on the one hand to improve the governance structure of
Chinese enterprises, enriching the company's capital, to increase or
Fast process of Chinese enterprises listed overseas, or contributed to the Chinese
enterprises have listed shares rose, on the other hand let
Rolling in money earned on excess funds. Private equity investment and financing on
both sides, is the win.
However, the Chinese government has not yet fully open capital account, and the
Chinese government's strategy for some relatively sensitive
Industry there is a degree of protection, which result in an objective outside the
private equity fund to invest in Chinese companies in a
Kind of degree of control. This control is divided into two categories: first, the
National Development and Reform Commission and the Ministry of Commerce,
"Foreign Investment Bank
Industry Guidance Catalogue ", the clearly defined" limits on
foreign investment "and" prohibited foreign investment
"in the industry sector, which
To limit the scope of private equity investment fund; second, for not setting up in
China of foreign private investment entity
2      as     defined      above,      taken    from      investment     encyclopedia,
3, as defined above, quoted from Reuters financial dictionary,
Offering the right funds, to invest in overseas financial platform for the lack of
Chinese enterprises also face restrictions and currency exchange
Export earnings limit; Third, if the establishment in China of foreign-owned
investment company, it must meet the Ministry of Commerce
"On Investment Companies by Foreign Investment Tentative
Provisions" in the stringent conditions, such as one year before the
Total assets to investors of not less than 400 million U.S. dollars, the investment
company's registered capital of not less than 30 million U.S. dollars and so
This is the international financial community in terms of private equity predators are
not a problem, but for many small and medium-scale
Private Equity Fund, the reluctance of the. In addition, the investment entity
established in China, means that investment income must be
Income taxes in accordance with Chinese law, and no tax breaks, which for all private
equity fund
Words are unacceptable. For example, private equity funds in the United States only
15% of the tax burden on capital gains tax, if
Investment entity established in China, will face 33% of the income tax burden.
Capital-seeking motives is endless. As Marx said, when more than 300% profit
margin, capital of the dare
Take on the risk of the gallows. In private equity investments, driven by high-income,
foreign private equity funds have to do whole body
The stops trying to find industry controls and capital controls in China's
shortcomings and gaps, take advantage of Chinese enterprises earn high as
Long gains. Offshore private equity fund controlled by the Chinese government to
avoid the process can be divided into two stages, in 2006
Before the Chinese A-share market as long-term recession, foreign private equity fund
focused on how to help by industry
Policy limits of Chinese enterprises listed overseas; in after 2006, with the rapid
progress of China's A share market,
More high-quality listed companies targeting the domestic capital market, foreign
investment will focus on private equity funds transfer
For the A-share market listed companies.
This paper, through case study approach, analyzing each of private equity funds
outside of the pipe to avoid the Chinese Government
System methods. Cases to choose private equity fund of up to two years on field
research as the basis. As
For various reasons, the case of companies are given anonymously, but I can confirm
that all of this article
Chinese companies are building private equity financing in the real case basis. If this
could help China's economic scholars
Have a more in-depth evaluation of the effectiveness of China's current
capital controls, or to help the reader understand the pursuit of profit motive of
financial innovation
New means of how amazing, then author delighted.