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TPG, Shanghai to Set Up $740 Million Yuan Fund

James Coulter, founding partner of TPG Capital
“We believe the time is right for further commitment to China,” James Coulter, managing general partner and founding partner of TPG Capital, said.

Aug. 23 (Bloomberg) -- TPG Inc., the buyout firm run by David Bonderman and Jim Coulter, is seeking to raise 5 billion yuan ($740 million) with the government of Shanghai’s Pudong district for its first yuan-denominated private equity fund.

The fund will invest in China’s consumer, retail, financial and health-care industries and focus on medium-to large-sized companies nationwide, Coulter, founding partner at TPG, formerly known as Texas Pacific Group, said at a speech in Shanghai.

TPG, which manages about $57 billion in assets, follows Blackstone Group LP and Carlyle Group in setting up yuan-denominated funds in China as they increase investments in an economy that surpassed Japan in the last quarter to become the world’s second biggest.

“Given Europe and the U.S. are on a slow recovery course, international private equity firms are increasingly looking to China for investment opportunities,” said Hubert Tse, Shanghai-based partner at Boss & Young, a law firm which advises overseas private equity firms on setting up onshore yuan funds.

China is stepping up efforts to build its own private-equity industry as the government seeks to foster corporate governance and strengthen capital markets. The nation is on the cusp of a “big bang” of reforms that will give foreign investors greater access to China’s capital markets, Nomura Holdings Inc. analysts led by Hong Kong-based Sean Darby wrote in a report on Aug. 18.

The country is also seeking to broaden use of the yuan, also known as the renminbi, after first approving the currency to settle cross-border trade with Hong Kong in June 2009. The yuan has risen 0.4 percent against the dollar since China ended a two-year peg versus the U.S. currency on June 19.

Blackstone, Carlyle

“We believe the time is right for further commitment to China,” Coulter said. TPG invested in Shenzhen Development Co. in 1994 and its other investments include Lenovo Group Ltd., China’s biggest personal-computer maker and Daphne International Holdings Ltd., a shoe retailer.

Blackstone Group set up a 5 billion yuan fund with the Shanghai government in August last year to target investments in the eastern coastal city and neighboring areas.

Carlyle Group, the world’s second-biggest private-equity firm, received approval in March to form a $100 million fund with Fosun Group, a Chinese privately owned company with businesses spanning steel, mining and property.

Foreign direct investment in China rose for a 12th straight month in July, highlighting confidence in an economy that surpassed Japan in the second quarter. Investment rose 29.2 percent to $6.92 billion last month, according to the Ministry of Commerce.

China’s leaders have pledged to expand the role of domestic demand in the economy in a bid to reduce the reliance on exports after the global crisis hurt trade. Health-care market growth will accelerate to 20 percent to 25 percent this year, spurred by rising government spending and increased investment from multinational drugmakers, Katherine Lu, director of China equities at Oppenheimer & Co., said in May.

To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net

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