Organizers set an attendance target of 100 funds and 1,500 people for last year’s Tianjin Private Equity Forum. They ended up playing host to twice the number of funds and upwards of 5,000 people, according to Terry Teng, director of International Financing Services (IFS), which acts as a bridge between private equity (PE) firms and the Chinese government.
The strong attendance reflects Tianjin’s heavyweight status in China’s nascent domestic private equity business. The city is home to the Bohai Industrial Investment Fund, the country’s first yuan-denominated fund when it was established in 2006 and the likely prototype for a wave of domestic PE funds.
“We are trying to make this fund as commercial and market-oriented as possible,” said Cui Jindu, vice mayor of Tianjin and the man responsible for the city’s financial portfolio. He made the remark during a visit to Shanghai in March to promote this year’s edition of the China International Private Equity Forum, which again happens in Tianjin.
The Bohai Fund is based in the Binhai New Area, which encompasses Tianjin Economic-Technological Development Area (TEDA), Tianjin Port Free Trade Zone and the Port of Tianjin. The fund will run for 15 years and plans to raise a total of US$2.8 billion. Its publicly disclosed acquisitions include a 10% stake in Chengdu City Commercial Bank for US$135 million and a 20% holding in Tianjin Pipe, which manufactures steel pipes used in building oil pipelines, for US$200 million.
Management of the fund is ceded to a third party, Bank of China’s investment banking arm, but Frances Du, who researches private equity at JL McGregor and Co, believes the government still provides significant guidance.
“This fund structure, for them, is considered creative,” she said. “However, when they make investment decisions, the government is still highly involved, that’s what I heard from [an official with knowledge concerning the matter].”
Regardless of where the power really lies, Tianjin is bullish about developing its investment environment. A further 10 venture capital and private equity funds are thought likely, with a total capital of US$2.6 billion.