TPG Inc, the buyout firm run by David Bonderman and Jim Coulter, is seeking to raise 5 billion yuan (US$740 million) with the government of Shanghai’s Pudong district for its first yuan-denominated private equity fund.
The fund will invest in China’s consumer, retail, financial and health-care sectors, and focus on medium to large-sized companies nationwide, Coulter, founding partner at TPG (formerly known as Texas Pacific Group) said in a speech in Shanghai.
TPG, which manages about US$57 billion in assets, follows Blackstone Group LP and Carlyle Group in setting up yuan-denominated funds in China as they increase their investment in an economy that surpassed Japan in the last quarter to become the world’s second biggest.
“Given Europe and the US are on a slow recovery course, international private equity firms are increasingly looking to China for investment opportunities,” said Hubert Tse, Shanghai-based partner at Boss & Young, a law firm which advises overseas private equity firms on setting up onshore yuan funds.
China continues to step up its efforts to build its own private-equity industry as the government seeks to enhance local corporate governance and strengthen capital markets.
The nation is on the cusp of a “big bang” of reforms that will give foreign investors greater access to China’s capital markets, Nomura Holdings Inc analysts led by Hong Kong-based Sean Darby wrote in a report released last Wednesday.
The country is also seeking to broaden use of the yuan after first approving its use to settle cross-border trade with Hong Kong in June last year.
The yuan has risen 0.4 percent against the US dollar since China ended a two-year peg to the greenback on June 19.
“We believe the time is right for further commitment to China,” Coulter said.
TPG invested in Shenzhen Development Co in 1994 and its other investments include Lenovo Group Ltd, China’s biggest PC maker and Daphne International Holdings Ltd, a shoe retailer.
Blackstone Group set up a 5 billion yuan fund with the Shanghai government in August last year to target investments in the eastern coastal city and neighboring areas.
Carlyle Group, the world’s second-biggest private-equity firm, received approval in March to form a US$100 million fund with Fosun Group, a Chinese privately-owned company with businesses interests that span steel, mining and property.
Foreign direct investment in China rose for a 12th straight month in July, highlighting confidence in economy growth. Investment rose 29.2 percent to US$6.92 billion last month, according to China’s Ministry of Commerce.
China’s leaders have pledged to expand the role of domestic demand in the economy in a bid to reduce reliance on exports after the global crisis hurt trade.
Health-care market growth is expected to accelerate by 20 percent to 25 percent this year, spurred by greater government spending and increased investment from multinational drugmakers, said Katherine Lu, director of China equities at Oppenheimer & Co in May.
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