China wants funds from foreign private equity firms

China welcomes more foreign private equity firms to invest in its real estate, technology and services industries, the capital's equity exchange said.

"China hasn't sufficiently opened up to foreign firms" in purchases of state-owned enterprises, said Xiong Yan, president of the China Beijing Equity Exchange, during an interview on Saturday in Beijing. "Foreign buyout firms especially have a lot to offer in highly innovative sectors."

Such firms are stepping up expansion in Asia, where private equity and buyout transactions climbed sevenfold to 122 billion U.S. dollars last year, according to data.

Private equity funds will continue to seek opportunities in the Chinese market and are expected to pump 10 billion dollars into the country in 2007, according to a high-ranking summit on finance and the high-tech industry in Beijing.

Statistics show that the 17 Asian private equity funds now allowed to invest in China raised a total of 7.6 billion dollars in the country during the first three months of the year, more than three times the amount in the same period last year.

In China, the government has expressed concern that buyout firms only seek short-term profits, forcing Washington-based Carlyle Group to cut its proposed stake in a state enterprise.

Carlyle Group, manager of the biggest U.S. buyout fund, twice scaled back its planned investment in Chinese machinery maker Xugong Group Construction Machinery Co, after China said the nation's biggest equipment makers should remain under state control. Carlyle's original October 2005 bid, which offered 375 million dollars for 85 percent of Xugong, was the first by a private equity firm for a major Chinese SOE. In March, it agreed to pay 1.8 billion yuan (235.2 million dollars) for 45 percent of the equipment maker.

"China welcomes all investors with deep pockets and a long-term investment approach," Xiong said. "Though we'll naturally be more selective about bringing in overseas investors as our economy develops and the total amount of foreign investment in the country grows."

Investment from private equity funds reached 738 billion dollars globally in 2006, of which 11.7 billion dollars were invested in the Chinese market, according to statistics from Zero2IPO, a service provider of China's venture capital and private equity sector.

The China Beijing Equity Exchange was set up in February 2004. It serves as a trading platform for assets including shares in state-owned firms, intellectual property and innovative financial products, according to the equity exchange's Website.