By Peter Stein
HONG KONG (Dow Jones) - Goldman Sachs Group Inc. and Morgan Stanley launch separate private equity funds in yuan, the most recent strategy of financial firms to expand presence in China.
On Thursday, Goldman signed an agreement with the Chinese government to launch a private equity fund denominated in yuan which aims to raise 5,000 million yuan (U.S. $ 770 million), according to a source informed.
The deal has already received the necessary regulatory approval, said this source and was signed Thursday in Beijing at a ceremony attended by Lloyd Blankfein, Goldman's president and the mayor of Beijing, Guo Jinlong.
private equity unit of Goldman will manage the new fund, which the company and the government of Beijing will be financed with his own money while other investors are looking for between the wealthy and institutions in China.
Morgan Stanley is believed to announce details of its own private equity fund denominated in yuan next week in Hangzhou, according to people. The Wall Street firm will partner with Hangzhou Industrial & Commercial Trust Co., said the source. It is not known yet how much it would raise the background.
Some of the largest private equity firms in the world have already launched similar funds for Goldman and Morgan Stanley. The holding company owned by the city of Beijing which is partnering with Goldman is a partner of Carlyle Group LP in a private equity fund denominated in yuan. TPG and Blackstone Group LP have also launched funds in that currency.
For several years, foreign private equity firms have gone struggling to finalize agreements in China with large dollar funds raised abroad. Most agreements involving minority and are involved in a lot of paperwork. The big players in the industry have concluded that they would impose fewer restrictions on yuan funds raised from local investors.
Foreigners, however, face intense competition from a growing number of Chinese private equity funds whose objectives include many of the same agreements.
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