Private Equity in China

China has become the new frontier for private equity investors or private equity funds hoping to attract Chinese investors, also venture capitalists are staking their claim there. With a thriving economy and a booming financial expansion--thanks to a reformation of laws governing private investment--Americans in private equity hurrying to China is akin to miners in the Gold Rush. Today, I will look at some of the differences between China's private equity and U.S. private equity.

Difference of Private Equity in China
Whereas American funds tend to invest in middle-market or big businesses, China's private equity funds are more like late-stage venture capital investors. Chinese funds look for proven businesses with established positions in the market, eliminating as much risk as possible before investing. Also, while American funds typically avoid the technology sector, China's private equity funds strongly invest in tech areas like pharmaceuticals, agriculture and energy.

Instead of the big takeovers that America's private equity is known for, most funds in China purchase only a minority stake in companies. This is because China's entrepreneurs especially distrust investors and are unwilling to give up a majority share to outside investors. The size of investments tend to be smaller in China because the cost for expanding and operating a business is significantly less.

Tax and regulation reform have led China's financial growth, and more changes for China's private equity sector are in the works, making China a crucial area for American private equity investors.

Link to This Resource: Private Equity in China

http://privateequityblogger.com/2008/07/private-equity-in-china.html