China's private equity market offers significant opportunities for foreign investors. Here's how to navigate the regulatory landscape and investment structures.
Investment Channels
QFLP (Qualified Foreign Limited Partner)
- Direct investment in RMB funds
- Available in pilot cities
- Quota-based system
- Streamlined foreign exchange
Offshore Structures
- Invest through offshore funds
- Target China-focused companies
- More flexibility
- Exit through offshore listings
Trend: QFLP programs have expanded significantly, making direct RMB investment more accessible for foreign PE investors.
Fund Structures
Limited Partnership
- Most common structure
- GP manages, LPs invest
- Pass-through taxation
Corporate Fund
- Less common
- Corporate income tax applies
- May suit certain strategies
Regulatory Requirements
- AMAC registration for fund managers
- Fund product filing
- Qualified investor requirements
- Investment restrictions by sector
Due Diligence Focus
- Target company legal status
- Ownership structure clarity
- Regulatory compliance
- Financial accuracy
- Key person risks
- Exit feasibility
Exit Strategies
- IPO (domestic or offshore)
- Trade sale
- Secondary sale
- Management buyout
- Redemption
Key Challenges
- Regulatory complexity
- Exit timing and options
- Currency conversion
- Information asymmetry
- Corporate governance
Investment Documentation
- Term sheet
- Share purchase agreement
- Shareholders agreement
- Articles of association amendments
- Management agreements
PE Investment Advice
I help foreign investors structure and execute private equity investments in China.
Contact MeDisclaimer: This article is for informational purposes only and does not constitute legal advice. For advice on your specific situation, please contact me directly.
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