Inside the GP: A dangerous game?

Most firms in China are nervous about social media — and the government is not exactly helping to persuade them otherwise.

Promoting your brand through social media can be risky at the best of times – but particularly for private equity firms in China, who are accustomed to almost no interaction with even mainstream media.

The Chinese government isn’t helping. In September, the authorities launched a crackdown on internet dissidents, which led to hundreds of high-profile bloggers being detained, according to local media reports. 

Their justification comes from the Supreme People’s Court and Supreme People’s Procuratorate of China, which have used a legal interpretation of China’s Criminal Law to punish online critics. Authorities can prosecute if a “defamation or a rumour” is re-posted 500 times or more, or a blog is viewed 5,000 times, according to communications firm Ryan Financial. 

“Often traditional media is still viewed with some scepticism – let alone social media, which is often viewed as having little upside,” owner Damien Ryan explains. 

“[Now] the tone in China is changing around social media, whereby there is a criminal element to it. [So private equity] firms who are risk-averse are probably going to continue to be [so], because now you have that other element – even though it is unlikely the new rule would impact them.”

In fact, one investor relations executive at a China-focused private equity firm says its investment team is too afraid even to speak to the press, for fear of saying something wrong and getting on the government radar. 
But not all share these fears. Alberto Forchielli, co-founding partner at Mandarin Capital Partners, laughs off the suggestion that a firm could get in trouble with the government for using social media to communicate their message. 

“Unfortunately [the Chinese] live in fear, so 90 percent of it is an exaggeration,” he says.

Forchielli is an avid blogger and social media user in China. His Chinese and English language blogs have a combined readership of around 1 million people, he says. 

While not all of his posts are private equity-related, Forchielli is adamant that his activities online have helped him source deals and boost his profile, particularly LinkedIn and his blog. 

“I get five deal propositions [per week] from social media. Three I will discard, and two I will pass on to my team, whether it is in China or Europe – and that makes around 100 [propositions] per year. Out of those, we may close two or three from social media.”

However, this is rare in Asia. Few private equity firms have initiated a social media programme, and most are reluctant to even consider its benefits, Ryan believes – despite its potential to help firms boost their profiles. 
Nonetheless, public interaction is increasingly unavoidable for private equity firms – and many Western firms active in Asia are ramping up their activity. 

For example, in February, The Carlyle Group launched a podcast series as part of its communications strategy, which also includes an active social media presence and a newly-updated website.

As Carlyle spokesperson Liz Gill put it: “What we want to do is show people who we are, who we work for, and how we create value. By generating understanding, we want people to ultimately appreciate what we do.” 

Adds Forchielli: “Private equity does not have a positive image and [firms] are always on the defensive. I think social media is one of the elements that can help.” Private equity firms no longer have the luxury of flying under the radar, he insists. “They manage way too much money not to be visible.”