What’s new: The China Securities Regulatory Commission (CSRC) has approved a pilot program in Shanghai for a trading platform to enable share transfers by venture capital (VC) and private equity (PE) funds, a step that aims to broaden exit channels for early- and late-stage investors.
The trial at the Shanghai Equity Exchange will be China’s second, following the launch of a similar pilot in Beijing in December 2020.
Investors in VC and PE investment funds sometimes need to cash out their holdings early. Previously, China lacked public trading platforms for these investors to find potential buyers for their shares, leaving them no alternative but to sell privately or rely on intermediaries to find buyers. But this practice raised concerns about the potential for misconduct in the absence of a transparent public market.
Under the Shanghai trial, the CSRC has told authorities with responsibility for its oversight to ensure only eligible investors are allowed to trade PE or VC funds and to strictly carry out their responsibilities for daily supervision of the platform and controlling risks.
The background: VC and PE funds are playing an increasingly important role in China’s capital markets, raising vast pools of money from eligible investors, known as limited partners, to invest in privately owned entrepreneurial companies in various stages of development who need funding.
As of the end of October, the Chinese mainland had 30,432 PE investment funds that managed 10.5 trillion yuan ($1.6 trillion), and 13,525 VC investment funds managing 2.2 trillion yuan, data from the Asset Management Association of China show (link in Chinese).
Related: Cover Story: Managing China’s $1.6 Trillion Private Investment Market
Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Nerys Avery (nerysavery@caixin.com )
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