From establishing the first private equity fund, Tianjin has become the pilot city winning most fund approvals from the State.

In April, 2008, the first overseas Chinese invested fund was set up in the Binhai New Area of Tianjin. In June, 2008, more than 500 private equity fund companies from all over the world gathered in Tianjin and made a “speedy dating” with more than 2,000 domestic enterprises. In August, the National Development and Reform Commission nodded Tianjin’s application to prepare for a shipping industrial fund.

In experts’ eyes, the launch of the 20-billion-yuan shipping industrial fund will strengthen Tianjin’s shipbuilding capability and capacity to transport cargoes for Chinese companies. The fund will fuel the financing system for China’s ship-building and -managing industry, and facilitate the formation of international shipping and logistic centers of the country. In June, 2009, about 1,700 enterprises and 560 private equity investment funds from nearly 30 countries and regions worldwide gathered in Tianjin, seeking the combination of industry and capital.

Tianjin has been pinpointed to develop into a private equity fund center of China. The city is taking actions and perfecting policies and supporting measures to attract fund enterprises. So far, there are more than 100 equity and venture capital funds landing in Tianjin. Tianjin is now advancing to China’s fund centre with the financial innovation advantages entrusted by the Chinese Government.

In 2006, the State Council approved Tianjin Binhai New Area to lead the national comprehensive reform and experimental development and encouraged the area to undergo the financing reform and innovation. Therefore in principle any significant pilot reform of financial enterprises, businesses and markets can be first tested in Tianjin Binhai New Area.

In May of 2008, the National Development and Reform Commission issued a policy to support Tianjin’s efforts to develop equity investment funds.

In developed countries, due to the relatively mature fund and capital market, the proportion of direct financing can reach 50 percent or even higher. But in China the ratio is only 10 percent. The structural problem arising affects the healthy development of the economy — enterprises, especially SMEs having difficulties in financing. So they can not obtain capitals effectively. The high proportion of bank loans in enterprise financing results in the concentration of risks. Social funds are hard to be transformed into capitals, despite the excess liquidity.

Therefore to expand direct financing channels is extremely urgent. It has become a priority for Binhai New Area to make innovation in broadening financing channels.

At the end of 2006, the first Chinese-invested industry investment fund — the Bohai Industrial Investment Fund was set up in Tianjin. A year later, this Fund aroused wide attention, signing its first deal — to invest in Tianjin Pipe Group Corporation with about 1.5 billion yuan to fuel the development of national backbone industry.

At the end of 2007, the largest domestic government’s venture investment guiding fund in China — the Binhai New Area Venture Investment Fund was set up. With the investment size of 2 billion yuan, the fund adopts the pattern of “parent fund”. It focuses on attracting domestic and foreign venture capital organizations which have outstanding achievements and mature management experiences to the Binhai New Area, hoping to stimulate 50 billion yuan of direct investment.

According to the data provided by Tianjin finance service office, there are dozens of private equity funds in Tianjin now in addition to the industry investment fund approved by the State Council.

The Tianjin Municipal Government is promoting the exchange and cooperation between funds and enterprises. After the successful holding of the 1st and 2nd China International Private Equity Forum (CIPEF), the 3rd CIPEF raised its curtain in Tianjin in June of 2009, attracting 560 fund companies and 1,700 enterprises seeking potential capital cooperation and transaction.

The gradually improved supporting measures also prove the speedy transformation of Tianjin to be China’s “fund center”. The first self-regulatory organization of Chinese equity investment fund — the Association of Tianjin Private Equity Fund was established in 2007. Its main functions include the development of self-discipline regulations, supervision and inspection of members, to stop improper completion, to educate the market and so on.

According to Experts’ analysis, the emergence of the fund center will concentrate capitals from home and abroad, attract a large number of enterprises to settle in Tianjin, and enable the Binhai New Area to engage in financing innovation through the interaction between capital and industry.