From establishing the first private equity fundto getting the approval to set up a shipping industrialfund, Tianjin has become the pilot citywinning most fund approvals from the State.

In April, 2008, the first overseas Chinese investedfund was set up in the Binhai New Areaof Tianjin. In June, 2008, more than 500 privateequity fund companies from all over the worldgathered in Tianjin and made a “speedy dating”with more than 2,000 domestic enterprises. InAugust, the National Development and ReformCommission nodded Tianjin’s application toprepare for a shipping industrial fund.

In experts’ eyes, the 20-billion-yuan shippingindustrial fund will strengthen Tianjin’s shipbuildingcapability and capacity to transportcargoes for Chinese companies. The fund willfuel the financing system for China’s ship-constructingindustry, and facilitate the formationof international shipping and logistic centers ofthe country.

Tianjin has been pinpointed to develop aprivate equity fund center of China. The cityis taking actions and perfecting policies andmeasures to attract fund enterprises. So far,there are more than 100 equity and venturecapital funds landing in Tianjin. Tianjin is nowadvancing to China’s fund centre with thefinancial innovation advantages entrusted bythe Chinese Government.

In 2006, the State Council approved TianjinBinhai New Area to lead the national comprehensivereform and experimental developmentand encouraged it to carry out the financingreform and innovation. Therefore in principleany significant reform of financial enterprises,businesses and markets can be first tested inTianjin Binhai New Area.In May of 2008, the National Development and ReformCommission issued a policy to support Tianjin’sefforts to develop equity investment funds.

In developed countries, due to the relativelymature fund market and capital market, theproportion of direct financing can reach 50percent or even higher. But in China the ratiois only 10 percent. The constructional problemarising affects the healthy development of theeconomy — enterprises, especially SMEs havingdifficulties in financing, so that they can not obtaincapitals effectively. The high proportion ofbank loans in financing leads to the concentrationof risks. Social funds are hard to be transformedinto capitals due to its excess liquidity.

Therefore to expand direct financing channelsis extremely urgent, and it has become a priorityfor the Binhai New Area to make innovationin financing reform.

At the end of 2006, the first Chinese-investedindustry investment fund — the Bohai IndustrialInvestment Fund was set up in Tianjin. A yearlater, this Fund that aroused wide concernssigned its first deal—to invest in Tianjin PipeGroup Corporation with about RMB 1.5 billionyuan to fuel the development of national backboneindustry.

At the end of 2007, the largest domestic government’sventure investment guiding fund—BinhaiNew Area Venture Investment Fund was setup. With the investment size of RMB 2 billionyuan, the fund adopts the pattern of “parentfund”. It focuses on attracting domestic andforeign venture capital organizations whichhave outstanding achievements and maturemanagement experiences to the Binhai NewArea, hoping to stimulate RMB 50 billion yuanof direct investment.

According to the data provided by Tianjinfinance service office, there are dozens of privateequity funds in Tianjin now in addition tothe industry investment fund approved by theState Council.

The Tianjin Municipal Government is promotingthe exchange and cooperation between fundsand enterprise. The first China InternationalPrivate Equity Forum (CIPEF) was held in Tianjinsuccessfully. The second CIPEF was in June of2008, attracting 500 fund companies and 2,000enterprises for potential cooperation.

The gradually perfected supporting measuresalso reflect the speeding approaching of Tianjinto the “fund center”. The first self-regulatoryorganization of Chinese equity investmentfund — the Association of Tianjin Private EquityFund was established in 2007. Its main functionsinclude the development of self-disciplineregulations, supervision and inspection ofmembers, to stop improper completion, tohold investors education and so on.

According to Experts’ analysis, the emergenceof the fund center will gather the capitals from athome and abroad, attract a large number of enterprisesto settle in Tianjin, and bring the BinhaiNew Area to a financing innovation road throughthe interaction between capital and industry.