How to circumvent Chinese government controls for foreign private equity fundsWord下载.docx
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HowtocircumventChinesegovernmentcontrolsforforeignprivateequityfunds@#@HowtocircumventChinesegovernmentcontrolsforforeignprivateequityfunds@#@------Casesanalysis@#@Abstract@#@Inrecentyears,theoverseasprivateequityinvestmentsinChinesecompanieshavecausedwideconcern.Inthispaper,throughcasesanalysismethod,weanalyzehowtocircumventspecificrestrictionsinChinaforoverseasprivateequityfunds,aswellashowtoavoidChinesegovernmentcapitalitems’controls.FortheChineseenterpriseswhichtrytobelistedoverseas,theycancircumventthegovernmentcontrolsthroughred-chipmode,SNDAmodeandoverseasoptionmodewiththehelpofprivateequityfunds.FortheforeignprivateequityfundswhichtrytoinvestinenterprisesofA-sharemarket,theycancircumventthegovernmentcontrolsthroughforeignorundergroundbanks,shareholder'@#@sloan,thirdpartyownership,fakeshareequitytruedebt,acquisitionsofRMBinvestmentCo.andothermethods.@#@ThemainconclusionisthatChinesegovernmentindustrycontrolsandcontrolsofthecapitalitemsarenoteffective.Chinesegovernmentshouldeliminatecertainstate-ownedmonopolyindustryregulations,andstrengthentherealstrategicindustrycontrols,especiallynottorelaxcontrolsonoutflowofcapital.@#@1.Introduction@#@Inrecentyears,PE(PrivateEquity)isoneofthemostfashionableconceptsintheinternationalcapitalmarket.AccordingtothestatisticsofPrivateEquityIntelligenceinUK,all950PEsallovertheworldhadcontrolledover$440billiondirectlybyFeb2007,over$500billionbytheendof2008.Privateequityinvestmentsrefertotheunlistedequityinvestmentsoftheenterprises.Withprivateequityfinancing,enterprisescandevelopnewproductsandnewtechnology,increasetheircapital,mergerandacquireothercompanies,andenhancetheirbalancesheet.GeneralizedprivateequityinvestmentsincludeeveryphaseoftheequityinvestmentsbeforeIPO(InitialPublicoffering),VC(VentureCapital),LBO(LeveragedBuyout),Pre-IPO,andPIPE(PrivateInvestmentonPublicEquity).NarrowsenseprivateequityinvestmentsrefertoPre-IPO,i.e.equityinvestmentsinrelativelymatureenterprisesthatreadytoIPOinthenextfewyears.Oncetheenterprisesarelistedsuccessfully,investorscanselltheequityinsecondarymarketstogetreturnsafterspecificlock-upperiod.Inthisarticle,theprivateequityinvestmentsrefertonarrowsenseconcept.@#@Privateequityfundsareoperatedbyprivateequityfirmsdirectly.Asstrategicinvestors,privateequityfirmsactivelyparticipateinthemanagementandtransformationoftheenterprisestheyinvestin.Justasriskinvestmentcompanies,thefundsmayinvestinunlistedemergingenterprises,inordertomakealotofmoneyaftertheIPOoftheobjectives.Intheotherhand,theyalsochoselistedcompanieswhichwillbeimmersedinmanagementpredicamentasthegoals.Theywillgettheleadershipofthecompanyfirst,andthenprivatizeit(delisting).Afterthetransformation,thecompanywillbelistedagainandtheinvestorswillmakealotofmoneyobviously.Atpresent,theglobalmostfamousprivateequityfundsincludetwocategories.Onecategoryareprofessionalprivateequityinvestmentinstitutions,suchasKKR,Blackstone,Carlyle,andTPG,anothercategoryaretheprivateequityfundsthatundertheinternationalfamousinvestmentbanksandfinancialinstitutionssuchasprivateequityfundsunderMorganStanley,Goldman,CitibankandHSBC,respectively.@#@IntheemergingmarketeconomysuchasChina,comparedtotheenterprisesindevelopedcountries,Chineseenterpriseshavefastergrowthwhichforeignprivateequityfundsareinterestedin.Inrecentyears,famouscasesaboutforeignprivateequityfundsinvestinChineseenterprisesemergeinanendlessstream.Forexample,NewbridgecapitalinvestedinSDB,WarburgPincusinvestedinHayaoGroup,MorganStanleyinvestedinMengniuDairy,GoldmanSachsinvestedinSuntech-power,andBlackstoneGroupinvestedinChina-bluestar.Ononehand,overseasprivateequityfundscanimproveChinesecorporategovernancestructure,enrichtheenterprises’capital,whichmayacceleratetheprocessofChineseenterprises’overseaslisting,orcontributetoraisethestockpriceofthelistedChineseenterprises.Ontheotherhand,overseasprivateequityfundalsomakealotofmoney.Privateequityinvestmentisawin-winresultforbothsides.@#@However,Chinesegovernmenthasnotfullyopenedcapitalitemsyet,andtheChinesegovernmenthasacertaindegreeofprotectioninsomerelativelysensitivestrategicindustry.SothatoverseasprivateequityfundswillmeetcertaincontrolswheninvestinChineseenterprises.Theseregulationsaremainlydividedintothreecategories:
@#@First,theNationalDevelopment&@#@ReformCommissionandtheMinistryofCommerceclearlydefinedwhich