China opens up PE business to all brokerage firms

SHANGHAI: Chinese brokerage firms will be allowed to conduct private equity business after the securities regulator formalised a 2006 pilot program, a move that could intensify competition in the fast-growing sector.

A booming IPO market and the lure of high returns kept China's private equity sector humming in the first half of 2011, stoking fear of asset bubbles amid rising concerns over the quality of listed Chinese companies.

The China Securities Regulatory Commission (CSRC) has issued new guidelines enabling brokerage firms took part in the pilot scheme to incorporate their private equity operations into their regular businesses.

The private equity operations will now be regulated just like the other businesses of the brokerage companies, according to the guidelines posted on the website of the CSRC on Friday.

A total of 34 securities firms have been approved to set up private equity funds under the five-year-old program, the official Shanghai Securities News said on Saturday.

Following the new guidelines, all qualified securities firms can apply to the CSRC for a business license to set up private equity funds.

However, brokerage firms are not allowed to invest more than 15 percent of their own capital in their private equity businesses, the guidelines said.

The guidelines had also capped the maximum number of investors in a private equity fund set up by a brokerage firm at 50.

Copyright Reuters, 2011