TPG Inc., the buyout firm run by David Bonderman and Jim Coulter, will set up a 5 billion yuan ($740 million) fund with Chongqing to invest in private companies as the country boosts development of inland provinces.
“We see Chongqing as the center of growth for western and central China and the transformation of both the consumer and industrial base in that area,” said Coulter in a phone interview from the municipality of Chongqing in central China.
TPG, which manages about $57 billion in assets, announced its second yuan-denominated fund in China in as many days. Yesterday, it signed an agreement for a 5 billion yuan fund with Shanghai’s Pudong government that will focus on the financial, consumer, retail and health-care industries.
TPG joins Blackstone Group LP and Carlyle Group in setting up local currency funds in China as they increase investments in an economy that surpassed Japan as the world’s second biggest in the last quarter.
China is promoting development in its western regions to expand the role of domestic demand in the economy as the nation seeks to reduce the reliance on exports after the global crisis hurt trade. Premier Wen Jiabao said last October that the government is willing to cooperate with other countries to spur growth in western China.
TPG is partnering with the Chongqing Municipal Financial Services Office and Chongqing Liangjiang New Area Development & Investment Group Co., according to a company statement released before a briefing in Chongqing. The buyout firm will set up an office in the Liangjiang New Area and “focus on making on-shore investments to support the growth and expansion of Chinese companies to and from Western China,” the statement said.
China’s private equity industry should grow at least twice the rate of the world average as allocation by institutions lag global peers, he said. Recent changes to the law allowing Chinese insurers to invest in private equity will also boost inflows, he said.
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 capital markets, Nomura Holdings Inc. analysts led by Hong Kong-based Sean Darby wrote in a report on Aug. 18.
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 growth will remain “very robust” relative to the rest of the world even with a slowdown in the second half and “beyond the aspiration” of most other economies, he said.
“It’s never a straight line but the direction is definitely up,” he said.