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RMB Funds: The Evolving Role of Foreign Investors and Fund Managers in China

January 22, 2010

By Joel H. Rothstein

RMB funds have captured the attention of international private equity and venture capital investors and fund managers desiring to build investment platforms in China. A RMB fund is an investment fund formed in China under Chinese law and denominated in the domestic currency, the Renminbi. RMB funds are already a prominent feature of Chinas developing domestic private equity and venture capital industries. Foreign involvement in RMB funds, either in the form of fund management or direct investment into the fund, has recently become increasingly possible spurred on by changing legislative policies and programs. Many foreign investors and fund managers desiring to compete in China view RMB funds as the next opportunity. The laws and market practices governing RMB funds are still rapidly evolving. Potential investors and managers will face challenges, but market players with flexibility, creativity, and patience may also find valuable opportunities.