Report: Hangzhou to launch private equity incentive package

The package reportedly includes subsidies of up to CNY 5m for private equity firms and will be launched before the end of the year.

Hangzhou, the capital city of China’s Zhejiang province, intends to launch a package to attract private equity investment before the end of the year, Meng Fanming, director of the finance office of Hangzhou told the Shanghai Daily.

Private equity firms with registered capital of more than CNY 100 million ($14.6 million) can enjoy subsidies of CNY 2 million, while firms with a registered capital of more than CNY 1 billion can enjoy a CNY 5 million subsidy, according to the report. Hangzhou is keen to create more finance channels for small- and medium-sized businesses, especially now when credit is scarce.

In July, the city announced plans to launch two private equity funds – the Qian Jiang Industrial Fund, for which CNY 5 billion will be raised to invest in industrial projects, as well as a CNY 560 million venture capital fund to invest in internet and technology companies.

Hangzhou wants to be a haven for venture capital and private equity funds, city mayor Cai Qi said at the time.

However, Meng dismisses the notion that Hangzhou is competing with neighbour city Shanghai to attract private equity players and capital. The private equity market is still in its early stages of development in China and there is ample private capital in the Zhejiang province, said Meng.

Shanghai released its guidelines on equities investment in August. The city will allow foreign investors, including private equity, venture capital and hedge funds focused on Chinese equities to set up a local entity that enjoys the legal status of local firms and receives special tax treatment, according to a government document obtained by Reuters.  

The Chinese government already allows Beijing and Tianjin to give foreign investment funds legal status. All three cities are vying to be China’s equities investment centre.