Private equity investment booms as regulator eases control

Venture capital and private equity firms in China sealed in July the most investment deals in three years, and the momentum is likely to continue after the country's top foreign exchange regulator eased capital controls for foreign firms, an industry report said on Wednesday.

The number of settled deals rose 43.5 percent from a month earlier to 122 last month, the Beijing-based Zero2IPO Research Center said in a report. The value of 108 deals that have disclosed transaction figures totaled US$3.025 billion, a 28.4 percent rise from a month earlier, according to the report.

Machine manufacturing sector attracted the most investment of US$623.8 million, accounting for 20.6 percent of the total value due to the purchase of a 10 percent stake in home appliance manufacturer Qingdao Haier Co Ltd by US private equity firm Kohlberg Kravis Roberts & Co.

That was followed by US$480.4 million in the real estate sector and US$458.1 million in the financial industry.

In terms of the number of deals, the Internet industry topped with 41 deals, followed by 18 deals in the telecommunications sector and 12 in the information technology sector.

The State Administration of Foreign Exchange, the top foreign exchange regulator, on Monday launched a pilot program that allows foreign companies to buy stakes in Chinese companies with their registered capital.

The program started running in 16 special economic zones including those in Shenzhen and Pingtan in Fujian Province as part of a reform to relax capital controls on foreign companies.

"The experiment is a major stimulus for the private equity industry as it offers a new access for foreign capital to enter Chinese market," said Liu Hongyuan, an analyst with Zero2IPO.