Private Equity in China: The 'Cautious' Gold Rush


Code : BSM0018

Year :

Industry : Banking, Insurance and Financial Services

Region : China

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction:China emerged as one of the ‘engines’ of global growth and international investors showed immense interest to become a part to the China story. The Chinese investment scenario posed several challenges to the foreign investors, yet there seemed to be several rewards as depicted by the continuous investment boomsince 2002. Global private equity players were targeting China's dynamic sectors, which had showed signs of reforms since the late 1990s. China became the favoured destination for investment because of itsmarket potential (US $1.3 trillion), sharply increasing domestic demand (per capita income doubling every ten years) and vast pool of low-cost labour. It is notable that if China continues to grow at such a rapid pace in future, then the acceleration of global economic activity in China would reduce the prospects of a recession in 2005.

The Chinese economy was expected to grow by at least 8%per annumfor the years to come. Private equity flow has been consistent since the formulation of Laws by theChinese government on Private equity in 2001. Though private equity playerswere apprehensive of their future inChina, the country’s economic growth and the opening up of the economy came as a shot-in-the-arm in attracting global private equity players into China.

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