In October, private equity funds raised $3.2 billion for investments focused on China while 42 private equity firms invested in 25 Chinese companies.
Of the 25 companies, 17 disclosed $1 billion received in investments, an average of $61.93 million per deal, according to the Zero2IPO Research Center, a Chinese venture capital and private equity service provider.
The traditional sector saw the biggest inflow of capital due to investors investing heavily in TMT. A total of $668.3m was invested in five deals in the traditional sector. Blackstone’s acquisition of a 20 percent stake in state-backed chemicals company China National Bluestar, for $600m, also augmented the sector’s investment amount.
In terms of investment amount received, the traditional sector took the lead, followed by the services, broad IT, cleantech and bio/healthcare sectors.
As a result of the financial crisis, valuations have fallen, making investment costs lower and stimulating the investment market to an extent. Accordingly, the downward investment trend during the past months halted and began to rebound in October, according to the report.
Other factors encouraging private equity investment include the readjusted evaluation criteria for domestic projects, resulting in less investment expenditures; the less stringent regulatory policy for domestic investments; and the fact that China is less affected by the crisis compared with developed countries, the report noted.
In a move to bolster investor sentiment, the Chinese government will use fiscal policy to ensure a growth rate of at least 8 percent in 2009, (10 percent was the forecasted growth rate this year), said John Zhao, chief executive of Beijing-based Hony Capital, at the PEI/EMPEA Emerging Markets Private Equity Forum in London.
Since China’s stock markets have fallen, slowing down new listings, Zhao pointed out that private equity currently offers a better prospect of raising capital than the stock market.