Chinese regulators have ruled that yuan-denominated private equity funds can only be treated as local if all their capital is sourced within China, The Wall Street Journal reported. Foreign PE firms had been hoping that their renminbi funds would be treated as local – a classification which would put them on a more equal footing with Chinese rivals – even if up to 5% of funding was sourced outside China. However, the National Development and Reform Commission, the country’s economic planner, decided that all capital in yuan-denominated funds must come from Chinese investors. “One of the most attractive benefits of raising and managing [yuan-denominated] funds is to be able to compete with the domestic investors on a level playing field,” said Joseph Chan, a lawyer at Sidley Austin. “But if you’re still treated as a foreign investor, then you’re playing second fiddle.”