Foreign investment partnerships in China

A boost for Private Equity? China allows foreign-invested partnerships

A significant hurdle for foreign PE funds in China is the lack of an appropriate structure for setting up an onshore fund (a so-called Renminbi fund) that can raise funds locally and invest without the need to go through arduous foreign investor approvals. New rules allowing foreign-invested partnership enterprises (FIPEs) look set to change that.

The rules are the Measures for the Administration of the Establishment of Partnership Enterprises inside China by Foreign Enterprises or Individuals (the Measures) that were issued on 2 December 2009 and will come into effect on 1 March 2010.

Although since 2003 foreign PE funds have been permitted to establish Renminbi funds in the form of "venture capital companies", that structure did not offer the kind of flexibility that private equity funds generally enjoy abroad. Venture capital companies were highly restricted in the manner in which their