Development of industry investment funds needs careful nurturing

When private equity investment funds first entered the PRC, in deference to the sensitivity of the term “private”, and given that “industry fund” was much more appropriate to describe the then economic policy that put the government in the driver’s seat, the term “equity investment fund” was replaced by the term “industry investment fund”.

The Notice of the State Council Approving and Transmitting the Opinions of the National Development and Reform Commission [NDRC] on Intensifying the Key Work Involved in the Reform of the Economic System in 2009, issued by the State Council on 19 May 2009, mentions “accelerating the establishment of an equity investment fund system, and issuing measures for the administration of equity investment funds as soon as possible”. The term “industry investment fund”, whose use at the state level had continued to that time, now formally became “equity investment fund”.

To date, there are no national-level laws or regulations that clearly and uniformly define “industry investment fund” or “equity investment fund”. Based on the definition of “equity investment fund” appearing in article 1 of the Opinions on Promoting the Development of the Equity Investment Fund Business, issued by relevant authorities of Beijing municipality, an industry investment fund in the PRC is an equity investment fund and means a non-security-type investment fund that is established by privately offering units to specific targets, that invests in the equity of non-listed enterprises and that provides value-added services thereto. An equity fund can take the form of a company or a partnership.

Cheng Haiqun is a partner and Hong Yifang is a trainee at Zhonglun W&D Law Firm in Shenzhen