EMPEA: RMB fundraising soars in China

Government-backed entities and mainland Chinese investors are the driving force behind the increase in capital raised by RMB-denominated private equity vehicles.

China fundraising figures from EMPEA show more capital has been raised in renminbi in the first three quarters of 2017, compared with the same period for the previous five years.

A total of $5.9 billion was raised by 19 funds from January to September this year, the highest on record since 2011, according to data from EMPEA Industry Statistics Q3 2017, which includes capital raised private equity, private credit, and private infrastructure and real assets.

RMB funds are becoming a dominant force in fundraising brought about by strong interest in alternative investments from both government-backed entities and private investors in mainland China, the research noted.

Hong Kong-based CITIC Capital Partners raised $1.6 billion in June this year for its latest China-focused vehicle, which was a combination of both USD and RMB. Last year, Hony held a $2.7 billion final close on its eighth flagship vehicle which comprised two pools of capital – one USD-denominated and the other renminbi (RMB)-denominated – each with a target of $1 billion.

According to PEI data, seven private equity and venture capital funds collectively raised $790 million from January to September. The data does not track government-led fundraising.

Meanwhile a separate report from PwC published in July this notes that RMB funds are exploring opportunities in disruptive sectors such as internet finance and biotechnology.

“RMB funds are being increasingly used to finance innovative high-technology sectors to identify foreseeable opportunities amid a slowing economy,” Amanda Zhang, PwC China Private Equity Group North China Leader said. “In the past two years, large-scale investments occurred in mobile internet and high-technology sectors, involving both early-stage start-ups and established companies that have benefited from industry consolidation. The developed capital markets and strong M&A performance provide a diverse channel to exit.”

Latest transactions include Sequoia China’s $60 million series B funding of services booking platform Klook as well as China Capital Group’s $30 million investment in auto insurance search engine Cheche365.com.