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Domestic PE industry may touch 1t yuan, experts say

(China Daily/Agencies)
Updated: 2009-11-06 08:39

China's homegrown private equity industry could grow to 10 times its current size in the next few years as domestic firms fund SMEs, allowing China's PE firms to better compete in a market long-dominated by global giants, industry executives said on Wednesday.

The mainland's private equity industry - still in its infancy only three years ago - could grow to 1 trillion yuan ($146.46 billion) over the next five years from less than 100 billion yuan now, Katherine Wang, chairwoman of Power Capital Corp, said at a conference in Taipei.

"One major policy the government has taken is to encourage PE funds by giving them tax incentives from their investments," said Wang.

"Chinese PEs would be able to compete head to head with foreign firms like Carlyle, TPG Capital and Softbank over the next five years," she told reporters.

China's PE market, which so far has been dominated by foreign firms, will be increasingly favorable to domestic players who are better positioned to fund small- and medium-sized firms in the mainland, some executives said.

"These firms do not have sufficient capital to grow, giving a very good chance to China's local PEs," said Han Zhisen, vice-secretary general of the Beijing Private Equity Association.

"They would prefer local firms like us to foreign PEs, which always demand controlling stakes," said Han.

As mainland private equity firms expand, they will also target Taiwanese companies, executives said.

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"Good investment opportunities for them will be in Taiwan's services sector, whose risk is lower than technology firms," said Howard Lin, chief investment officer of Fubon Financial Holding.

Providers of financial services, media, distribution and hotels would be potential targets for mainland PE funds, Lin added.

Taiwan currently does not allow mainland private equity firms to invest in the island's companies.

But trade relations across the Straits have improved markedly since last May when Taiwan leader Ma Ying-jeou took office.

Taiwan expects to sign a much-anticipated financial services pact with the mainland within the month, an official from the island said on Tuesday.

The pact is expected to create ties between the mainland's and Taiwan's financial markets.