China Huarong Sets up PE Fund

A private equity fund jointly set up by a state-owned assets management firm and a local financing vehicle was approved by authorities last week.

The Huarong Yufu Fund will be officially launched in August.

Lai Xiaomin, general executive of China Huarong Asset Management Corp., said the private equity fund plans to raise 10 billion yuan, the biggest PE fund in Chongqing, a southwestern municipality. 

China Huarong will have a 70 percent stake in the PE fund while Chongqing Yufu Asset Management Corp., the local financing vehicle, will hold a 30 percent stake.

Huarong Yufu PE fund is registered in Chongqing, while its headquarters and management are based in Beijing.

The funds will be raised in three phases. The target for the first phase is 2 billion yuan; second phase, 3 billion yuan and third phase, 5 billion yuan. The 2 billion yuan raised in the first phase will be invested in cars, manufacturing and construction.

The PE fund was established in accordance with an agreement between the Chongqing municipal government and China Huarong in May 2009. In the past year, Huarong has invested about 4 billion yuan in Chongqing.

Chongqing Yufu, with market capitalization of 20 billion yuan, was created in 2004 for the restructuring of state-owned companies. It controls or has stakes in 25 companies.

China Huarong, established in 1999, was set up to take over bad loans from the Industrial and Commercial Bank of China. Its business scope has expanded into securities brokerage, leasing, trust and investment banking.