Private equity investment in China growing despite challenges

China's private equity investment has maintained growth this year, despite the COVID-19 pandemic and regulatory challenges, according to a latest industry report.

Investments in biomedicine, information technology and Internet sectors turn out to be the leading force.

Shanghai is one of the priority destinations for qualified foreign investment limited partner, or QFLP investment, thanks to a mature ecosystem and improved business environment, industry officials said.

By the end of September, China was home to more than 31,549 PE investment funds with a total investment scale of 10.96 trillion yuan (US$1.57 trillion), compared with 10.78 trillion yuan by the end of 2021 and 9.87 trillion yuan in 2020, according to a report jointly released by investment consultancy firm Tricor and law firm JunHe.

In 2021, China's PE investment accounted for 43 percent of the Asia-Pacific market and grew 23 percent year on year, a previous report by Bain said.

The PE investment continues to grow in the biomedicine, IT and Internet industries. The capital market also sees segments like property, logistics and new energy as having great potential in 2023, due to the likely post-pandemic economic rebound and national policies like carbon neutrality, said Zhang Hailiang, Tricor China's chief executive.

Foreign private fund managers have emerged as prominent players in the Chinese PE market. International asset management institutions tend to set up asset management companies in Singapore, Hong Kong, or offshore islands, as an investment vehicle for the Chinese market.

Industry insiders said that cities, including Shanghai and Beijing, are attractive for QFLP investment because of their mature financial ecosystem and improved business environment.

There are several other cities with favorable policies to attract foreign PE funds but they "all look up to Shanghai" currently, said Xie Qing, a partner at JunHe.