The Analysis Of Private Equity Fund In China

Under the background of rapid economic development in China,more and more enterprises,especially private enterprises and a number of high-tech industries,are an increasing financing demand for financing;At the same time,as the concept of modern financing are becoming more and more impressive.A good number of funds are eager to search the channels to increase its value.However,the traditional financial system and the channels can no longer meet the requirements of these enterprises and social.Therefore,PE(private equity investment funds) comes in to being.Private equity investment funds in foreign countries which have sophisticated financial markets,had important market position and improved the development of mechanisms in nearly a hundred years and made great contribution to the economic and prosperity development.Particularly,in recent ten years,private equity investment funds on capital markets are leading an revolution of M&A and integration,which greatly promoted the industrial concentration and optimize the allocation of social resources.Private equity investment funds are becoming the international capital market the leading force.In recent years,private equity fund has grown by leaps and bounds in China.A lot of enterprises grow rapidly under the help of private equity fund.The private equity fund played a positive role in the promotion of the corporate governance structure and the financial integration.However,comparing with the sophisticated financial and legal system,the development of private equity fund encountered many problems.The first problem is the lack of the legal system.Private equity investment funds, as the emerging financial industry,the developed in our country for only 10 years.As we all known,our legal system just transferred from a plan economics to market economics and it is not hard to under the serious deficiencies of legal supporting for PE in many respects.The inherent deficiencies of the legal framework cause a lot of restrictions to the development of PE,especially RMB PE.So it has become the necessary security and basic condition to break through the framework and improve the legal system and definitions.The second problem is the structure of our country's capital market.The structure of current domestic capital market is too simple.The threshold of listing is high;the financial channel is narrow;property rights transaction is not active enough and the developing of the exit channels for capital is still at the very initial state.Thirdly,our investors are far from mature such as foreign sophisticated investors.By the impact of traditional concept,it is hard for our investors to identify the difference between an investor and a manager.Which is manifested mainly in the strong interested of participating in the investment business. This is a potential obstacle to development of domestic PE.Finally,the greatest obstacle of PE developing in China is lacking of funding sources.The current funds sources in our capital market include Pension funds,commercial banks and insurance companies,private enterprises and individual funds.But the current regulation of the government limited these institution and investor to enter the field of PE,which cut off the capital sources supporting for PE.To find the solutions for these problems is the key point of developing private equity funds in China.In the first section of this article,I gave an expounded of private equity fund theoretical and clearly defined the concepts and definitions in the following article. Then is the analysis of developing history and current situation of private equity fund in other countries and regions.The article focused on the status quo analysis of the private equity fund in China.The lack of long-term funds sources will exists for a long.The investors and the capital market are still far from mature.The volatility of regulation and the incompletion of the legal and tax system are also the factors which blocks the development of the private equity in China.This article provided suggestions to solve these problems,including improving the structure,enriching the sources,developing the service industry to widening the investing direction and improve the mechanism of the exit solution for private equity fund.