Beijing is prepared to accept foreign equity groups, following a new law that came into effect last Friday which established a legal
framework for private equity and venture capital funds in China, the Financial Times reported. The law encourages domestic and foreign private
equity groups to use a Cayman Islands-registered offshore structure, and removed a rule that imposed taxes on partnerships and
their individual partners, allowing large investors in investment funds to enjoy limited
liability. “We hope foreign private equity can make more use of the RMB (renminbi) market and develop more RMB-denominated funds," said Wu Xiaoling, deputy governor the central bank. Private equity investment in mainland companies has been down from 2006 levels since a law introduced last fall blocked an offshore structure used by most domestic and foreign private equity firms.
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