Can private equity benefit?

Author: | Published: 1 Mar 2009

The China Banking Regulatory Commission (CBRC) recently issued new M&A financing rules, the Guidelines on Risk Management of Loans Extended by Commercial Banks for Mergers and Acquisitions, which for the first time permit Chinese onshore banks to extend acquisition financing to Chinese persons for up to 50% of the total price of an acquisition. The Guidelines are a big step forward in the development and modernisation of China's financial system, a potential incubator for increased activity in the domestic M&A market and, consequently, consolidation within Chinese industries.

Despite the requirement of a strategic and industrial link between purchaser and target company, the Guidelines mark an end to the prohibition of acquisition finance in China promulgated under the General Rules on Lending issued in 1996 by the People's Bank of China. This is consistent with the Ten Measures to Stimulate the Economy and the Nine Financial Measures recently announced...