China Is Strengthening The Supervision Of Foreign Investment Funds.

Speculative capital has been heavily regulated by the regulatory authorities through large-scale cross-border investment "channel" to circumvent the depreciation of the renminbi.

A merger fund with financial and industrial attributes is also faced with supervision because it is easy to be borrowed from speculative capital.

It is estimated that only 20 billion to 40 billion potential cross-border PE/VC acquisition funds will be suspended in December alone, and it is likely to pay high price "breakup fees" to overseas sellers.

Chen Wei, chief analyst of the group, thinks that only 1 months remain in 2016. The cross-border M & A fund of 200-400 billion US dollars is expected to be affected. There are mainly two types of projects. One is potential and still negotiated projects. The other is a project that has been negotiated because of the Limited record or repurchase.

For cross-border cross-border M & amp; a funds which cannot be delivered, it is not only a business suspension, but also a high cost of "splitting up".

Li Ming (a pseudonym) of a PE in Shanghai said to the China Securities Journal that the breakup fee was usually 1/1000.

This means that if a $1 billion scale project is stranded, the breakup fee will be $1 million.

Affected by the "buyer type" PE, represented by CDH, Hongyi and other powerful equity investment institutions.

"Buyers" will adopt the "pad money" mode to conduct cross-border investment. They first look for and buy overseas targets, and cultivate them for a period of time before they can find their buyers in China.

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Limited, they may face huge capital loss.

The most "bone breaking" is investment banks.

According to the figures, as of the end of November, the amount of cross-border pactions matched by Chinese investment banks this year has reached 100 billion US dollars.

If the policy continues until next year, their business will suffer a "cliff slide".

Because of the financial nature of PE/VC, some speculative funds facilitate the use of these funds as a tool for offshore arbitrage.

Li Ming, a Shanghai based PE, was quoted as saying that some high net worth people and financial companies went to sea with the help of PE/VC in order to bypass supervision.

In order to meet these funds, some PE/VC quickly set up a quick sea going out to create projects at will. Some PE/VC took advantage of its fund-raising function to catch some "free cars" of cross-border mergers and acquisitions of domestic listed companies, and adopted a leverage structure to lead to the emergence of big project with leverage.

China is strengthening its supervision over foreign investment funds.

On 06 December, the heads of the four departments of the NDRC, the Ministry of Commerce, the central bank and the foreign exchange bureau answered questions about China's relevant departments under the current external investment situation, which will strengthen the supervision of foreign investment. The regulatory authorities pay close attention to some irrational foreign investment trends in the real estate, hotels, cinemas, entertainment industry, sports clubs and other areas in recent years, as well as the hidden risks of foreign investment such as large non principal industry investment, limited partnership investment, "big mother" and "quick setting out".

Cross border investment and foreign exchange restrictions and countries

The authority echoes the position.

In November 29th, the State Administration of foreign exchange said that it would cooperate with the relevant administrative departments of overseas investment to conduct a real compliance review, crack down on false foreign investment activities, and support enterprises with the ability and conditions to carry out direct foreign direct investment with genuine compliance.

At the end of November, last week, regulators announced a number of measures to control capital outflows.

On the 29 day, Reuters quoted sources as saying that the State Administration of foreign exchange has made new moves to strictly control capital outflows, sharply tightened the approval threshold for capital remittance, and increased the foreign exchange review of large overseas mergers and acquisitions, including pactions that had already been granted foreign exchange quota.

Li Ming, a PE employee in Shanghai, was quoted by the China Securities Journal as saying that PE/VC, which had spent more than 50 million dollars before going to sea, had to be interviewed by the safe.

On the day of 25, different media published three reports on strictly controlling the illegal exit of funds.

The central bank requires domestic enterprises to carry out RMB foreign lending business with macro Prudential Management of the integration of foreign currency and foreign currencies, and requires the management and the lenders to control the quota.

The central bank conducted oral guidance, requiring banks to be alert to funds flowing out of the Shanghai free trade zone with false foreign investment.

China will make foreign companies to China

Strengthen supervision and examination.

The central bank has issued a notice that foreign direct investment of partnership enterprises, overseas investment of large and fast parent companies and the establishment of large investment projects of non principal projects with a scale of more than 1 billion US dollars are not allowed to purchase foreign exchange.

In October 29th, UnionPay International announced that UnionPay cards were prohibited from paying overseas investment insurance to prevent funds from going to sea.

"Although this kind of control of capital may be temporary, it will bring uncertainty to China's foreign investment."

Hu Zuliu, President of the former high Shanda China, and chairman of Chunhua capital of Beijing and Hongkong, told this newspaper.

Experts suggest that for some PE/VC funds that meet the "support for industrial upgrading" purpose, we can optimize the existing cross border investment project audit framework and adopt a differentiated strategy, so we can conduct spot checks before and after cross border investment projects.

For example, when filing, the plan for post investment management and capital repatriation can be strengthened.

In the aftermath, we did not ask whether the funds were returned in time, whether it was a flight or a loss or a further investment.

This will help maintain the overseas image of China's M & A investment.

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