Private equity funds in China are nervously eyeing a push by the country's top securities regulator to gain oversight of the fast-growing sector, fearing increased scrutiny and tougher new rules. This could be bad news for foreign private equity firms such as Blackstone Group and Carlyle Group, which are bullish on China but already have to navigate past a phalanx of regulators.
In the wake of the global financial crisis, the question is no longer whether China's private equity industry needs a single regulator and national legislation to fill a legal void. Rather, the question now is which agency should have the main responsibility and the extent of supervision, part of government efforts to protect investors' interests and curb insider trading, market manipulation and illegal fund raising.
The China Securities Regulatory Commission (CSRC) surprised the sector in 2009 with its proposed revisions to the Securities Investment Funds Law, seen by some as an attempt by the CSRC to muscle its way into becoming the sector's main regulator.
The move was a setback for the state economic planner, the National Development and Reform Commission (NDRC) - currently the main private equity regulator by default - which had submitted a proposal to the cabinet to win approval to regulate private equity funds. The cabinet shelved the NDRC proposal after the CSRC argued that the funds should come under its jurisdiction.