China Development sets up a private equity fund

By Crystal Hsu  /  Staff reporter

Wed, Mar 27, 2013 - Page 13

China Development Financial Holding Corp (中華開發金控) said yesterday it recently set up a private equity fund that aims to invest in unlisted companies in the local creative industries, in line with a strategy shift to focus on asset management, instead of capital gains, to pursue higher earnings.

The fund has paid-in capital of NT$1.5 billion (US$50.18 million), with the conglomerate’s main subsidiary, China Development Industrial Bank (中華開發工銀), accounting for 40 percent and the government-owned National Development Fund (國發基金) chipping in about 20 percent, China Development Industrial Bank chief investment executive David Chow (周大任) said.

Other investors include firms in the technology, tourism and logistics sectors, which have provided 50 percent of the capital and may supply the other half in the next 12 to 18 months, Chow said.

The fund was set up as China Development Financial is seeking to cut its dependence on investments of its own capital, because the strategy has been blamed for the company’s low returns on equities and a lack of recurrent income, Chow said.

The new fund, which still needs regulatory approval, is part of the company’s plan to change strategy, after rising labor costs in China squeezed the profits of technology firms, while China’s economic reforms suggest huge business opportunities for service providers, Chow said.

The fund is targeting a return of 30 percent and is seeking to create value for Taiwanese vendors in skincare products, travel agencies, restaurants and the entertainment business, among other partners, Chow said.

Ideal targets should have the ability and share the ambition to expand in China because the local market is too small, he said.

Separately, the Financial Supervisory Commission yesterday approved plans by China Construction Bank Corp (中國建設銀行) to upgrade its representative office in Taiwan to a branch.

The Chinese lender set up its representative office in April 2011 and it has qualified for the upgrade after meeting the one-year requirement, the commission said in a statement.

The Chinese bank is the world’s sixth largest in terms of tier-one capital and it occupies 12th place by measure of its assets, the commission said.

The bank’s capital adequacy ratio rose to 14.32 percent last year from 13.68 percent in 2011, helped by a 40 billion yuan (US$6.44 billion) bond issue.

At the weekend, the bank, one of China’s top four lenders, reported that its net profits rose 14.1 percent year-on-year to 193.2 billion yuan last year, up from 169.3 billion yuan in 2011 on growth in net interest income.