China plans to boost oversight of private equity funds

HONG KONG • China plans to tighten oversight of private equity funds set up outside the country by domestic firms, including the disclosure of investors'identities, to mitigate financial risk and keep tabs on offshore fund-raising, four people familiar with the matter said.

This will likely stymie the flow of money from global and Chinese investors to such offshore funds, which have been raising billions for overseas projects, including Beijing's Belt and Road programme, lawyers and private equity investors say.

"If this happens, some of the attractions of investing in offshore funds of Chinese PE firms will be lost," said a Hong Kong-based lawyer who was aware of the plans. "If the hand of the Chinese regulator is stretched outside China and the level of scrutiny on foreign investor increases, some... may look for other ways to deploy capital."

The move comes amid a crackdown by Beijing on debt-backed investments overseas, and shadow banking-linked wealth management products repackaged for use in overseas funds. Under the plan, the National Development and Reform Commission or state planner would be the governing body of Chinese offshore private equity fundraising activities, the people said.

Chinese private equity firms would have to disclose the identity of true investors, or "limited partners", they said, and banks and financial firms would also need approval before setting up future overseas funds.


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A version of this article appeared in the print edition of The Straits Times on January 26, 2018, with the headline China plans to boost oversight of private equity funds. Subscribe