Abstract
China’s PE industry entered the initial development stage in the early 1990s by establishing several investment fund companies.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
It refers to Wuhan Securities Investment Fund, Shenzhen Nanshan Venture Capital and other companies established in 1991.
- 2.
The China’s fintech regulation framework, just like that the regulation framework of PE, is embedded in the existing financial regulatory framework. The regulators of fintech include the PBC, China Securities Regulatory Commission (CSRC), China Bank Insurance Regulatory Commission (CBIRC, replaced by National Administration of Financial Regulation in May 2023), Financial Stability and Development Committee, National Internet Finance Association (responsible for industry self-regulation) (Xu and Xu 2020).
- 3.
In China, foreign PE firms entered the market before China’s local PE industry was developed, which led to different laws and regulations faced by foreign and local PE firms. In recent years, China exert great effort to regulate foreign and local firms and level the playing field (Yue and Zhang 2010; Bradford and McKinzie 2020).
- 4.
It is published on the CSRC website. http://www.csrc.gov.cn/csrc/c101939/c1045353/content.shtml.
- 5.
The notice and draft are published on the PBC’s website. http://www.pbc.gov.cn/rmyh/105208/4436903/index.html.
- 6.
Return misreporting of PE and VC fund managers is well documented in literature. With a sample of 997 buyout funds and 1,074 venture funds from Burgiss database, Brown et al. (2019) find that some underperforming managers manipulate reported returns during fundraising, and those managers are less likely to raise a next fund. With data of VC funds headquartered in the U.S. from PitchBook, Smith et al. (2022) find that fund managers can manipulate returns by inflating NAVs and by reporting selectively, and selective reporting by GPs overstates VC fund returns by 4 percentage points.
- 7.
Financial Services Authority (2006) identified risks posed by the PE market, including excessive leverage, unclear ownership of economic risk, market abuse, conflicts of interest, market access, market opacity, and overall capital market efficiency. To strengthen oversight of PE, the FSA exert efforts in improving its data collection, and enhance regulatory reporting requirements for PE firms to incorporate information on committed capital in addition to the existing requirements.
References
Bradford H, McKinzie R. Private equity in China: The impact of regulatory systems on private equity firms; 2020
Broeders D, Prenio J. Innovative technology in financial supervision (suptech)-the experience of early users. BIS Financial Stability Institute Insights on policy implementation No 9; 2018. https://www.bis.org/fsi/publ/insights9.htm
Brown G, Gredil O, Kaplan SN. Do private equity funds manipulate returns? J Financ Econ. 2019;132:267–97.
Brown G, Harris B, Jenkinson T, Kaplan S, Robinson D. Private equity: accomplishments and challenges. J Appl Corp Financ. 2020;32(3):8–20. https://doi.org/10.1111/jacf.12415.
Cumming D, Johan S. Regulatory harmonization and the development of private equity markets. J Bank Finance. 2007;31(10):3218–50.
Financial Services Authority. Private equity: a discussion of risk and regulatory engagement; 2006. https://www.treasurers.org/ACTmedia/dp06_06.pdf
Guo BS. Research on risk prevention and control strategies of private equity investment funds based on the perspective of risk control. Enterprise Reform Manage. 2022;20:99–101. https://doi.org/10.13768/j.cnki.cn11-3793/f.2022.1135.(inChinese).
Heed A. Regulation of private equity. J Bank Regul. 2010;12(1):24–47.
Hu M. Application and enlightenment of fintech in the private equity investment industry in the United Kingdom and the United States. Finance. 2022;3:89–94 (in Chinese).
Long JP. Improving China’s private equity regulatory system: Orientation, framework and countermeasures. Southern Finance. 2019; 2019(5). (in Chinese)
McCahery JA, Vermeulen EP. Private equity regulation: a comparative analysis. J Manage Gov. 2012;16:197–233.
Renneboog L, Simons T, Wright M. Why do public firms go private in the UK? The impact of private equity investors, incentive realignment and undervaluation. J Corp Finance. 2007; 13(4): 591–628. https://doi.org/10.1016/j.jcorpfin.2007.04.005
Shan CY, Zhao DW. Research on the application of Regtech in private equity investment management. Financ Develop Rev. 2022;4:37–48. https://doi.org/10.19895/j.cnki.fdr.2022.04.001.(inChinese).
Smith EE, Smith JK, Smith RL. Bias in the reporting of venture capital performance: The disciplinary role of FOIA. Rev Corp Finance. 2022;2(3):493–525. https://doi.org/10.1561/114.00000022.
Thomsen S. Should private equity be regulated? Eur Bus Organ Law Rev. 2009;10(1):97–114.
Xu Z, Xu RH. Chapter 7: regulating FinTech for sustainable development in China. In: Amstad M, Huang B, Morgan PJ, Shirai S, editors. FinTech in Asia: policies and practices. Tokyo, Japan: Asian Development Bank Institute Press; 2020
Yang R. Research on high-quality post-investment management of state-owned private equity enabled by blockchain technology. Reform Opening up. 2021;14:17–22. https://doi.org/10.16653/j.cnki.32-1034/f.2021.014.003.(inChinese).
Yong KP. Private Equity in China: Challenges and Opportunities. John Wiley & Sons Singapore Pte. Ltd.; 2012
Zhong GC. Research on the application prospect and supervision of blockchain in private equity trading platform. Hainan Finance. 2019;04:73–81 (in Chinese).
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2023 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Xu, R., Zhao, D. (2023). Technology Applications in Private Equity Regulation. In: Digital Transformation of Private Equity in China. Contributions to Finance and Accounting. Springer, Singapore. https://doi.org/10.1007/978-981-99-8482-4_4
Download citation
DOI: https://doi.org/10.1007/978-981-99-8482-4_4
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-99-8481-7
Online ISBN: 978-981-99-8482-4
eBook Packages: Economics and FinanceEconomics and Finance (R0)