From a little-known, foreign concept to a critical component of the country’s increasingly multi-layered capital markets, private equity in China has undergone tremendous development in the past decade. This Note first reviews the representative deals of major U.S. private equity firms (Bain Capital, Blackstone, Carlyle, KKR, TPG, Warburg Pincus, and the private equity arms of Goldman Sachs and Morgan Stanley) in China, and profiles leading Chinese private equity firms and their relationship with the U.S. firms. Then, the Note analyzes the evolving web of laws that regulates China’s private equity industry, with special attention to the rise of RMB funds, and recent legal developments such as the Foreign-Invested Partnership (“FIP”) regulation and the Qualified Foreign Limited Partners (“QFLP”) program that many believe will lead to a level playing field for foreign and domestic firms. The thesis of this study is two-fold. First, the development of a legal framework for private equity in China is closely tied to the country’s economic fundamentals. To date, private equity boomed in China largely in response to the unmet financial needs of small and medium-sized private companies and a financial system overly reliant on stateowned banks; going forward, the prosperity of foreign private equity firms in China will hinge on the country’s gradual relaxation of its foreign exchange control and its plans for the renminbi to become a global currency. Second, private equity offers a unique lens for understanding China’s legal system. In particular, this study examines the advantages and potential pitfalls of China’s administrative rulemaking process, and the important yet controversial role of the government in a historic economic transformation.

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