Comparative Analysis of Local Rules Regarding Formation of Private Equity and Venture Capital Funds and Management Companies in China (updated in November 2011)

Against the backdrop of a huge amount of domestic liquidity from both state-owned and non-state-owned enterprises, the launch of the long-awaited Growth Enterprise Market in Shenzhen at the end of 2009 and the continued growth of private equity investment activity in China, China is expected to witness an upsurge in private equity and venture capital activity. In addition to establishing domestic and foreign-invested venture capital investment enterprises (“VCIEs”) and venture capital investment management enterprises (“VCIMEs”), fund sponsors may also form domestic and foreign-invested equity investment fund enterprises (“EIFEs”) and equity investment management enterprises (“EIMEs”) in several of China's major cities or regions, including Beijing, Shanghai, Shenzhen, Tianjin, Chongqing, Suzhou Industrial Park, Changsha, Xinjiang autonomous region, Chengdu, Guangzhou and Xiamen pursuant to local rules and incentive policies for the formation of EIFEs and EIMEs. This Han Kun Private Equity Commentary discusses national and local rules regarding and incentives for the formation of VCIEs, VCIMEs, EIFEs and EIMEs from a comparative perspective.