Agricultural Bank of China to manage $75m PE fund

One of mainland China’s four major banks will enter the private equity industry, providing fund management services for a new state-backed fund.

The Agricultural Bank of China has agreed to provide custodial services for private equity funds operated by government-backed firm Suzhou Shengshang United Investment Center, according to state news agency Xinhua. To date Shengshang has raised a RMB542 million ($75 million, €50 million) fund, the first in a planned family of funds.

The Agricultural Bank of China will provide asset custody, accounting, clearing, corporate information, performance evaluation and risk management services for the fund.

Shengshang was founded last November, when the Chinese government approved a round of new private equity funds, financed by the state’s massive foreign currency reserves, to target specific industries designated to be of strategic importance.

The Agricultural Bank of China is one of mainland China’s top four banks, and manages more than RMB600 billion in assets. The new agreement is the bank’s first foray into private equity, Xinhua reported.

The Asian press reported today that China’s central bank asked the country’s major banks to observe loan origination caps or face penalties. The Agricultural Bank is considered the weakest of the four; it reported $100 million of nonperforming loans in its third quarter 2007 report. The bank is set to receive a $67 billion bailout from China’s sovereign wealth fund, and late last month central bank governor Zhou Xiaochuan told reporters at a press conference that would undergo a major restructuring soon.