Written by Judy Deng
On September 5, 2010, the China Insurance Regulatory Commission (CIRC) issued a circular (“CIRC Circular 79”) to explicitly permit China’s insurance companies to invest their assets in private equity. Such investments may be either direct or indirect, making China’s insurance companies potential equity investors in onshore industrial companies as well as limited partners in onshore private equity funds (known as “RMB funds”).
In direct investment projects, the portfolio companies are required to be growth-stage, mature or strategic new-industry companies or what are considered “pre-IPO” companies.
In the case of indirect investments (i.e., investments in private equity funds), there are detailed requirements as to the qualifications of the target private equity firms, including minimum registered capital (RMB100 million), management team (10 experienced managers), exit history (3 exits) and pre-investment assets under management (RMB3 billion). The aggregate investment in any one private equity fund may not exceed 20% of the fund’s total offering size.
CIRC Circular 79 also clarifies that outbound equity investment by Chinese insurance companies is governed by a 2007 regulation.