Chinese bank official calls for new PE rules

A director in the People’s Bank of China has called the country’s current rules ‘insufficient’ for investment needs.

The People’s Bank of China deputy director, Wu Xiaoling, has called for regulatory change to foster private equity within the country.

Wu Xiaoling reportedly has urged that Chinese commercial banks be allowed to invest in the country’s private equity funds, along with a list of other reforms to encourage the asset class, at an international forum held in the country’s northern city of Tianjin.

“Our current capital market is insufficient in meeting the funding needs of our companies,” Wu said, according to the China Economic Information Service. “Banks are institutions that manage risks anyway so they should be in the position to judge the risks in these instruments.”

It was unclear if Wu meant that banks should be allowed to invest in both foreign and local private equity funds, though she did specify that private equity firms should be given the room to bring in overseas management expertise to enhance a company prior to an IPO.

She also called for rules concerning how private equity funds can exit their investments, though she didn’t elaborate as to what those rules should be.

Not all Wu’s proposals were directed at regulatory reform, however. Wu also asked that foreign private equity firms raise yuan-denominated funds so portfolio companies would no longer list offshore.

Wu also proposed these reforms last September at the International Conference of Private Equity Investment.

China Development Bank and the Tianjin government do plan to set up a 2 billion yuan ($262 million) fund to invest in venture capital firms, according to the city’s deputy mayor, Cui Jindu.