China’s crackdown on illegal PE funds lacks steam

Author: Brian Yap | Published: 1 Sep 2016

China’s securities regulator has conducted a sweeping crackdown on illegal private equity fundraising activities onshore, but rules and regulations specifically tailored to address them remain outstanding.

The China Securities Regulatory Commission (CSRC) announced on August 16 that it had inspected 305 private equity and privately-offered fund management firms in the first half of 2016.

But counsel in China have said regulators need to take swift action against private equity entities that have committed fraud, while strengthening existing rules to create a deterrent.

"If the regulation of private equity fundraising is not strengthened, then it will have an impact on the Chinese economy," said Zhang Baosheng, partner at King & Wood Mallesons in Beijing. He added that this is not merely the government taking punitive action against private funds, it is also about mitigating their potential harm to the stability of China’s financial system.

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