RMB Funds, investment funds whose capital commitments and contributions are denominated in renminbi, the currency of the People’s Republic of China, have been the subject of considerable discussion in recent months.
This update focuses on recent announcements by the authorities in Shanghai, Beijing, Tianjin and Chongqing to encourage the formation and operation of RMB Funds in their municipalities.
The trend, toward a decentralised approval process, is also seen in a decision of the Ministry of Commerce ("MOC") in March 2009 to allow local authorities to approve a foreign invested venture capital investment enterprise ("FIVCIE") seeking to raise less than US$100 million.
Meanwhile, two new regulations at the national level, which may reverse this trend, are pending, namely, the Foreign Partnership Regulations and the Provisional Measures for the Management of Equity Investment Funds.
We anticipate that we will soon see foreign invested GP’s or other such management enterprises, especially those based in Shanghai and possibly elsewhere, managing private equity funds sourced from either domestic investors or foreign investors or both in the form of partnerships. Parallel USD/RMB fund structures and FIVCIE’s may nevertheless remain a viable alternative.