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The power of funds06/02/2008. Source: Asia Private Equity Review (APER).
 Direct equity funds are employed by various government units to advance their applicable goals, according to the Asia Private Equity Review (APER). A private equity fund, or direct equity investment, has become one of the most popular tools now being used by an increasing number of government units within China. For them, a pool of capital with a long-term investment horizon could help to achieve some of the tasks that require both time and monetary support.
Like many, the Putian government, a district in the Fujian Province, has recently sponsored the creation of a local private equity fund in an attempt to provide financial assistance to local enterprises. The Fujian Jiuhua Development Holding Co., Ltd. has a target fund size of 1 billion yuan (US$138 million) and has successfully completed its first closing at 500 million yuan. The local currency fund has received over 80% of the capital from local enterprises, while the balance was subscribed by Putian government .
Likewise, the Suzhou municipality, in its quest to access the most advanced technology, is one of the central forces in the Infinity I-China Fund that has successfully raised US$270 million thus far. The fund, to be managed by Infinity-CSVC Partners, will target Israeli technology companies with parallel investments in Chinese businesses that are seeking to develop and market Israeli technologies in China. The fund has enlisted Suzhou Ventures Group and the Israel-based IDB Group as two of its cornerstone investors.
Separately, the Beijing municipality government is reportedly drawing up plans to set up a fund of funds for those that are seeking to raise modest venture capital fund pools to finance small and medium enterprises. To be coordinated by the Beijing city government, the city’s first fund of funds will have a 10-year tenure.
On the international scene, as part of China’s agenda to cultivate relationships with African countries, a China-Africa Development Fund has been established. It has most recently made commitments to two projects, one in Ghana and the other in Ethiopia, which will together require a deployment of US$150 million. It should be noted, however, that both are the African subsidiaries of Chinese companies. In Ghana, the fund will help to finance a 200 megawatt natural gas-fired plant in which the Shenzhenlisted Shenzhen Energy Corp. would take up a 60% stake. In Ethiopia, the China-Africa Development Fund will partner with the Beijing-based CGC Ove r s e a s Construction in taking an undisclosed stake.
The China-Africa Development Fund was established in 2007 and is sponsored by the China Development Bank. It has an initial capital pool of US$1 billion, and is targeted to raise US$5 billion. It is mandated to invest in subsidiaries of Chinese companies that are based in Africa. In 2007, Chinese companies had invested over US$6.4 billion in Africa. A recent high profile alliance is the US$5.6 billion that the Industrial and Commercial Bank of China which has undertaken to take a 20% stake in Standard Bank.
One of the characteristics of the China fund pool is the strong government element. In 2007, China registered the launch of 45 funds, of which 11 were sponsored by government units (fig. 31).
Asia Private Equity Review (APER) is the foremost voice on matters related to private equity/venture capital in the region. Well-recognised as being the singular source for accurate and timely news, in-depth analysis and global perspectives, APER is published by the Hong Kong-based Centre for Asia Private Equity Research. For further information please visit their website at www.asiape.com or email them at info@asiape.com
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