1, wholly foreign-funded mode:
Overseas venture capital funds are audited by SAFE, and the Ministry of Commerce applies for and approves the establishment of RMB funds in China to directly invest in projects in China, such as IDG. At present, the application for setting up a RMB fund has been approved by the Ministry of Commerce, with a scale of about 500 million yuan.
From GP's point of view, this complete foreign investment mode will be the best mode to serve overseas LP. Both RMB and USD funds belong to the same LP group, and there is no conflict of interest in investing in projects and serving overseas LP.
However, due to the inflow of hot money into China in recent years, China government's own foreign exchange reserves are very high, and the government began to control the scale of foreign investment and actively encouraged local RMB to set up risk funds. Nbsp; kloc-the RMB fund model with 0/00% overseas investment may encounter difficulties in the application and approval process. In addition, the specific operation form after approval needs further discussion.
2. Sino-foreign joint venture mode:
That is, starting from the existing US dollar fund, looking for a suitable LP in China, * * * jointly set up a RMB fund. Many overseas funds such as Safran, Detong, Gobi and Zhiji have set up RMB funds in this mode. For foreign LPs, although they no longer have 100% of the newly established RMB funds, there will not be too many problems because the new domestic LPs only participate in the investment of RMB funds, which is relatively small compared with the larger US dollar funds as a whole.
More actively, due to the participation of local LP, the new RMB fund is close to localization, LP happens to be a government-guided fund, and the fund may also have certain advantages in policy review.
The RMB funds established in the above two modes are recognized as Sino-foreign joint venture RMB funds because of their foreign investment, and the establishment and operation procedures are complicated. Generally speaking, the establishment of funds, fund investment, listing and withdrawal of investment projects all require additional review by the Ministry of Commerce.
3. Completely local RMB funds:
GP with foreign investment background seeks LP to set up RMB funds in China, invest and withdraw from domestic projects. Only local RMB funds comply with relevant laws and do not need to be audited by the Ministry of Commerce. However, the disadvantage is that RMB funds and overseas dollar funds come from two completely different LP groups and are managed by GP, so there may be potential conflicts of interest when GP chooses which fund to use for investment projects.
At present, an important problem in setting up a fully localized RMB fund in China is that there are not enough LP groups in China. In the mature private equity fund market in Europe and America, university funds, pension and retirement funds, national sovereign funds, private wealth funds, enterprise investment funds and parent funds are the main sources of LP. The western concept of limited partnership (LP) has not been respected and practiced in China. Therefore, it is still difficult to recruit limited partner funds from listed companies, insurance companies and private companies. Many government departments (including provinces, cities and high-tech parks) have begun to establish guiding funds to guide and develop entrepreneurial industries, which can become a feasible source of LP funds in a short time.
In the long run, with the expansion of RMB investment and local listing, the four major activities of China's entrepreneurial industry cycle will be completed in China.