Coniparative Research Of Private Equity History And Government Investments Between China And United States

The private equity industry of the United States was born in 1946 in the highly-liberalized market economy. It had already entered into a mature stage after 60 years development. While, The counterpart of China emerged in 1985 under the background that the government started to push the technology transfer. The 25-years old Chinese private equity industry is undergoing a golden developing season after the reform of non-tradable shares and the prevalence of limited partnership fund in 2007. However, through the comparison of the developing histories, China is still facing problems as "overinvestment of stated-owned capital", "over-concentrating on Pre-IPO period"and "inferior value added service capabilities"U.S. Federal Government mainly adopts "free subsidy"and "finance guarantee" schemes, while Chinese Government takes "free subsidy", "guiding investment" and "direct investment" plans. Compared the government investment and financing plans of the two countries based on the assessment model, it is clear that Chinese Government investment plans are bearing weaknesses as "unsustainability of free subsidy fund", "reverse guidance of guiding investment fund" and "competition from direct investment fund against social capital"Through the economic analysis of government positioning in private equity market, It came to a conclusion that, in short term, the government should raise the capital supply in blank space, rectifying the market failure, while in long term, the government should withdraw the state-owned capital from the market step by step and level the price earnings ratio in equity trade, guiding the investors and investees to focus on improving the performance of the target companies.Based on the current problems of Chinese private equity industry and the government investment plans, The P.R.C Government should, in short term, optimize the government investment plans to maximize their utility, and in long term should reduce direct government interventions, conducting the marketization of the industry by indirect ways as policy setting and market supervision.