China should encourage foreign private equity (PE) firms to
raise funds in yuan on the domestic market to absorb the country's
excess liquidity, Wu Xiaoling, deputy governor of the People's Bank
of China, said Thursday.
"Private equity funds have served as the accelerator of
enterprises," said Wu at the International Finance Forum held in
Beijing.
She added that private equity had brought active results on the
development of the Chinese capital market.
"However, I hope foreign private equity funds would make more
use of the yuan market given the liquidity problem and an expanding
surplus in international payments," Wu said.
"What the country needs is not money, but expertise in
investment and management of private equity funds," Wu said, adding
that Chinese expertise in managing private equity funds was
scarce.
Encouraging foreign private equity teams to establish
yuan-denominated funds in China would be an effective way to
cultivate talents, she said.
Wu personally suggested that private equity joint ventures in
which foreign investors hold less than 25 percent should be treated
as domestic funds, which are allowed to invest in broader
areas.
But the authorities still need to carefully decide the maximum
investment allowed by foreign private equity in Chinese companies,
and restrict them in raising funds with depository banking
institutions, she said.
(Xinhua News Agency November 9, 2007)
