Being regarded as a grand financing feast, the2nd China International Private Equity Forum(CIPEF) was held on June, 2008 in Tianjin.About 2,000 domestic outstanding enterprisesand 500 international private equity fund companiesattended the forum, seeking togetherthe combination of industry and capital.

CIPEF is Approved by State Council and sponsoredby Tianjin Municipal People’s Government,All China Federation of Industry & Commerce,and Association for Corporate Growth(ACG). It has borrowed ACG’s pattern, “CapitalConnection” and “Speed Dating”, to set up afinancing bridge for the attended.

According to finance insiders, CIPEF is a beneficialtrial in the construction of China’s multilayercapital market system.

Generally a multi-layer capital market consistsof the main board, the second-board andthe third-board market so as to provide enterprisesof different layers different securitytransacting platforms. At present China’s mainboard market is being gradually perfected, andthe growth enterprise market is stepping to thestage of planning and proposals-seeking. Thenthe third-board market has become obviously“duck-legged” in the capital market system.

Accounting for about 99 percent of currentChina’s enterprises, small and medium-sizedenterprises (SMEs) generate 60 percent of thecountry’s gross industrial output value andundertake 40 percent of the taxes. They alsoprovide employment opportunities for 75 percentof the entire labor force. But despite theimportant role they are playing, SMEs are facingmore and more difficult financing situationsunder the environment of credit crunch andunsound multi-layer capital market system.

As the financing difficulties of SMEs are partlycaused by the lack of financing channels, privateequity funds bring to these enterprises anopportunity to raise capitals directly. Privateequity funds fill the gap of market demand andbank loans, bringing a new idea of financing.

Moreover, there are only less than 2,000 listedcompanies among hundreds of thousands ofChinese enterprises. Large quantities of nonlistedcompanies which have no formal offboardtransacting platforms have to transferstocks by auction or restructuring. As a result,the transaction of shares and property rightsbecomes inactive.

For the above reasons, to develop private equityfund is significant to the construction ofChina’s multi-layer capital market system. Notlike the traditional securities fund, private equityfund pays more attention to the cultivationof resources to be listed. And it can effectivelyrelieve the current problem of excess liquidityin Chinese financial market.

One of the features of the second CIPEF is theattendance of some newly-formed RMB privateequity funds from Beijing, Shanghai and Tianjin.Over 40 of them are from Tianjin.

In over one year’s time, the exposure rate ofRMB private equity funds and industry investmentfunds is increasing. Beginning with theconstitution of Bohai Industrial InvestmentFund, a boom of setting up industry investmentfunds, represented by the planning andbuilding of regional industry funds in Guangdongand Suzhou, has begun around China.

Private equity fund refers to the equity investmentfor non-listed companies by way of privateplacements. In accordance with their share ofthe contribution investors share the profit andbear the risk. But there are also a few of theseprivate equity funds which are now investinglisted companies by way of debit financing.

The first CIPEF was held successfully in June,2007 in Tianjin. It has become the biggest andhighest-level international meeting of global financing.In order to speed up the financing innovationin the Binhai New Area of Tianjin andexpand direct financing the organizers decidedto settle down CIPEF in Tianjin as a permanentannual meeting.