Private equity is very much in favour in China as other sources of finance have become difficult to access. Pressure on banks to maintain reserve requirements, dividend obligations at those banks and anti-inflationary government policies all limit the opportunities for small and medium-sized enterprises (SMEs) to raise sufficient finance through bank loans. Domestic, Hong Kong and US stock exchange listings take time and expense to complete, bring strict regulatory scrutiny, and subject issuers to periodic public disclosure requirements. In addition, Chinese companies that have undergone reverse mergers into listed shell companies overseas have become subject to attacks by short-sellers, effectively eliminating the reverse merger as a potential financing option.
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Frank Marinaro is a partner at Loeb & Loeb and the chief representative of the firm’s Beijing office. He may be contacted on +86 10 5954 3588 or by email at fmarinaro@loeb.com.cn
