Foreign equity funds welcome; green channel for Macao
Zhuhai will open up to more high-quality foreign equity investment with a lower entry threshold, greater supervision, and a green channel for Macao enterprises to help diversify that economy.
Under Pilot Measures for Qualified Foreign Limited Partners (QFLP), the Zhuhai government discussed at a June 22 briefing, foreign individuals and institutions may invest in non-publicly traded company equities.
Drawing upon Shenzhen and Guangzhou's experience, Zhuhai removed requirements for domestic equity investment management enterprises. These regarded place of registration, asset scale, asset scale of overseas shareholders, minimum registered capital/subscribed capital contribution, initial investment proportion, monetary contribution ratio, and investment deadline.
Allowed now is a more flexible fund management structure, including two general partners (GP) or separation of manager and GP. The investment scope has also been extended to shares not publicly issued or traded, debt-for-equity swaps, equity funds, and initial offerings.
Press conference [Photo by Chen Jiazhe / WeChat account: zhuhaifabu]
Also permitted is QFLP investment in domestic private equities and venture capital funds in accordance with laws and regulations. Securities companies and other financial institutions recognized by financial supervision authorities may engage in fund custody. Funds of funds are allowed for Macao investment in Chinese mainland projects as a limited partner.
In addition, there will be greater supervision of fund custodians, and investment and financial information reporting.
Zhuhai financial authorities will provide one-on-one prioritized services to Macao enterprises, further cooperate with Macao investors and the Chinese mainland investment management teams, and guide Macao investors to shift focus from real estate and bonds to equities and venture capitals.
This is to help build the Guangdong-Macao Cross-Border Financial Cooperation (Zhuhai) Demonstration Zone with the policy support of Hengqin as a Deepened Guangdong-Macao Cooperation Zone.
Three Macao enterprises have applied for pilot qualification since the Pilot Measures were released in May, and one has been approved, according to the Zhuhai Financial Work Bureau.
Since beginning the pilot in 2018, Zhuhai is now home to 16 QFLP enterprises with total registered capital contribution of $4 billion. This mainly flows to local strategic emerging industries such as high-end equipment manufacturing. QFLP accounted for 30.12 percent of local direct foreign investment in 2019 and 2020.
QFLP has diversified Zhuhai's private equity sector and attracted well-known domestic and foreign investment institutions including Hillhouse, IDG, KKR, and Qiming Venture Partners.
The removal of some restrictions and relaxation of formal requirements have opened Zhuhai to more high-quality private equity investment institutions and foreign investment.