Being regarded as a grand capital feast, the 3rd China International Private Equity Forum (CIPEF) was held on June, 2009 in Tianjin. About 1,700 enterprises, 560 private equity investment funds and 340 agencies from 30 countries and regions worldwide took part in the event, seeking the combination of industry and capital.

CIPEF is approved by State Council and sponsored by Tianjin Municipal People’s Government, All China Federation of Industry & Commerce, and Association for Corporate Growth (ACG). It has borrowed the experience and conference pattern of ACG. Through “Capital Connection” and “Speed Dating”, it is expected to set up a financing bridge for those attendants.

The 3rd CIPEF demonstrates that the number and quality of participating funds, enterprises, investors, as well as agencies have sharply increased, which is a strong evidence to prove investors’ confidence in the Chinese economy and China’s growth potential under the backdrop of the global economic recession. The fact also reflects various investors’ high expectation towards Tianjin and China’s financial system reforming, financial product innovation and the actual implementation of various financial policies.

According to finance insiders, CIPEF is a beneficial trial in the construction of China’s multilayer capital market system.

Generally speaking, a multi-layer capital market consists of the main board, the second-board and the third-board market so as to provide enterprises of different developing stages different securities transacting platforms. At present China’s main board market is being gradually perfected, and the growth enterprise market is stepping into the stage of planning and proposal-seeking. It will open in October of 2009. Then the third-board market has become obviously “duck-legged” in the capital market system.

Accounting for about 99 percent of China’s enterprises, small and medium-sized enterprises (SMEs) generate 60 percent of the country’s gross industrial output value and undertake 40 percent of the taxes. They also provide employment opportunities for 75 percent of the entire labor force. But despite the important role they are playing, SMEs are facing more and more difficult financing situations under the environment of credit crunch and unsound multi-layer capital market system.

As the financing difficulties of SMEs are partly caused by the lack of financing channels, private equity funds bring to these enterprises an opportunity to raise capitals directly. Private equity funds fill the gap of market demand and bank loans, bringing a new idea of financing.

Among the dozens of thousands of Chinese enterprises, less than 2,000 have been publically listed. Without an official OTC market, the majority of those non-listed joint-stock companies have no other option but to trade shares though auction or reshuffle. They seldom do stake or equity transaction.

For the above reasons, to develop private equity fund is significant to the construction of China’s multi-layer capital market system. Not like the traditional securities fund, private equity fund pays more attention to the cultivation of resources to be listed. And it can effectively relieve the current problem of excess liquidity in Chinese financial market.

In over one year’s time, the exposure rate of RMB private equity funds and industry investment funds is increasing. Beginning with the constitution of Bohai Industrial Investment Fund, a boom of setting up industry investment funds, represented by the planning and building of regional industry funds in Guangdong and Suzhou, has begun around China.

Private equity fund refers to the equity investment for non-listed companies by way of private placements. In accordance with their share of the contribution, investors share the profit and bear the risk. But there are also a few of these private equity funds which are now investing listed companies by way of debit financing.

The first CIPEF was held successfully in June, 2007 in Tianjin. It has become the biggest and highest-level international meeting of global financing. In order to speed up the financing innovation in the Binhai New Area of Tianjin and expand direct financing the organizers decided to settle down CIPEF in Tianjin as a permanent annual meeting. In June of 2008 and 2009, Tianjin witnessed the 2nd and the 3rd CIPEF held in the city successfully.