POTENTIAL STILL STRONG FOR PRIVATE EQUITY IN CHINA, SAYS STUDY

Private equity experts say that despite several high-profile deals falling through, the market for such deals in China remains attractive. In a report issued by Private Equity Asia, funds raised by the China target market have soared to over US$5 million for the first half of 2007, representing a 238.6% increase over the past year. "Those [regulators] are to some extent creating hindrances, but the figures show that, all in all, investors are managing to work around difficulties," said Jamie Paton of the Private Equity firm 3i.

Leading funds such as CDH, IDG-Accel, and Sequoia have all closed successfully in recent months, while global investors still target the PRC market. "China is currently the hottest market in terms of a fund destination," said Paton.

In response to such interest, the government has taken a measured approach, and has taken into account the issues of public perception involved with foreign ownership of what may be perceived to be 'national security' interests. In 2006, there were 133 private equity funds investing in Asia, raising an aggregate US$41 billion. Legislation has given more transparency to overseas strategic investors and greater liberalization of foreign direct investment in China's equity market, yet examples like that of the Carlyle-Xugong Machinery debacle continue to raise doubts.