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Tuesday May 10, 09:51
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Venture capital stream dries up in China on change in offshore investment rules
(by Julia Jenson)
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A slowdown is observed in global venture capital funds investment in the Chinese economy after the State Administration of Foreign Exchange issued new regulations hampering international share sales and capital raising by China companies. The notices issued by the state body on Jan. 24 and April 8 stipulate that Chinese citizens need to get approval to invest in an offshore company, which was previously not required. As a result, investment lost one-third from the same period in 2004, ending up at $552.6 million in the first quarter, says the Asian Venture Capital Journal.
``SAFE has valid concerns about people transferring assets offshore,’’ said Chang Sun, chairman of the association and a Hong Kong-based managing director of Warburg Pincus in Asia. ``The rules as currently published are impractical, hard to implement, and detrimental to foreign investment in China.’’
However, an unexpected change in the rules proposed by the regulators has confused many of the private equity investors who are now unsure of which direction to take in their investment strategies.
``It’s a big headache,’’ said Andrew Qian, managing director for New Access Capital Co., . ``Every private equity fund is scrambling to figure out what the measures mean and how to comply with them.’’
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