Private Equity News & Analysis

First Eastern launches China/India fund

First Eastern Investment Group, China’s largest domestic private equity firm, is to launch a new $200m fund aimed at facilitating trade between China and India.

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A new $200 million (€150 million) private equity fund aiming to exploit burgeoning trade between Chinese and Indian companies has been launched by Hong Kong-based First Eastern Investment Group.

First Eastern founder and chairman Victor Lap-Lik Chu told media representatives at the India Economic Summit that the fund would be operational by February 2005 and would normally takes equity stakes in companies of around 20 percent.

He added that the fund would be dedicated to Indian companies wanting to expand into China and Chinese companies wanting to access the Indian market.

Chu said the idea of a China/India private equity fund was first raised at the India Economic Summit three years ago, but few Chinese companies were looking at India at that time. He said there was now more interest from Chinese companies, which would complement existing enthusiasm from Indian firms in expanding into China.

“Indian companies are largely in the private sector, therefore they make quick decisions,” Chu told the Summit. “Companies in China are, however, owned by the state so decision making takes time. But in the next five years, both private and state-owned companies in China will have much higher investments in India than Indian companies in China.”

While China has attempted to attract private equity investment into the country from within Asia, it has tended thus far to look to Japan. For example, the Chinese government’s CITIC Group manages a $184 million fund assisting Japanese corporations in accelerating their expansion into China. However, it has long been thought that combining Chinese low-cost manufacturing with Indian software expertise could be a powerful mix.

Recent figures from the Chinese government illustrate that, in a board economic context, trade between China and India is taking off. The bilateral trade volume between the two countries reached $10 billion in the first nine months of 2004, an 83.8 percent increase on the same period last year.

First Eastern Investment Group, which was founded by Chu, has over HK$4bn billion available for investments in China and the Asean region.