More relaxation for renminbi funds

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Ever since the introduction of the concept of a foreign-invested venture capital investment enterprise (FIVCIE) in 2001 (and again in 2003), this form of organisation has become the most popular way for foreign sponsors wishing to set up an onshore vehicle that is denominated in renminbi and make private equity investments in China. These vehicles are known as RMB Funds.

The 2003 regulation that endorses FIVCIEs is the Administration of Foreign-invested Venture Capital Investment Enterprises Provisions (外商投资创业投资企业管理规定)– the FIVCIE Rules – which were promulgated by five government agencies, including the Ministry of Commerce (Mofcom) and the Ministry of Science and Technology (Most).

As of press date, China still does not have a national law that allows foreign investors to form and invest in a domestic limited partnership. The FIVCIE, if properly structured and documented, is akin to a limited partnership (for more on this, see The Future Onshore by Richard Guo, published in the January 2008 issue of IFLR Private Equity and Venture Capital Review). It therefore remains the only viable vehicle that can accommodate both domestic and foreign general partners and limited partners.