Research On The China’s Commercial Banks Involved In Private Equity Investment Problems

Private equity investment fund first started in the America and has a history of over three decades in foreign countries and now it has become one of the most important financial tool beside loans and IPO. It’s reported that the amount of money raised by PE fund has been over4%to5%of the GDP in some of the foreign countries, which obviously marks its importance in the economy system. In recent years, PE fund has begun to play an increasingly important role here in China and has become the focus of more and more investors in the after-crisis period. On one hand, it’s not so easy for many medium-small sized enterprises to get access to adequate loans from the banks, which has created more opportunities for the development of PE funds. On the other side, to promote the ratios of PE investment can help to enhance the management of the enterprises and reduce their financial cost. Despite the fact that PE funds have a late start in China, the Government has given great emphasis on it in recent years and it’s generally believed that a golden age for PE funds has found its way to us.Now, China’s commercial bank system is experiencing a thorough reform and PE funds will provide great opportunities for them based on the following reasons: First, when traditional business modes is challenged, the search for innovative profit making channel is a must for them. On that basis, PE funds are highly attractive because of its high return and fast development. China’s commercial banks will not fall behind in coming into this field which is also a way of dodging regulations of all kinds. Second, one of the greatest challenges for PE funds is how to find good project and get access to enough money at the same time and it’s obviously that this problem is easily solved if commercial banks make good use of their client resources. That’s why the cooperation between PE funds and commercial banks are getting better all these years. However, the current policy forbids the commercial banks from joining any PE funds directly, so many banks are trying to wind their way to the business without the restrictions of the policy. My research is based on the current situation.With a synthesis of the experience of foreign countries’PE fund development and our country’s reality, the following content has been focused on the possible models of China’s commercial banks getting into the business. On one hand, I analyzed the relationship among different models and the banks that suit it, on the other hand, I managed to find the best one on the current stage and table an assumption for how commercial banks running PE investment business under the future policy. What’s more, I tabled the suitable risk management measures by thorough case study.The thesis divide in six parts. In chapter one, I introduce the history and relative theory of PE fund to start a stage for the following analysis. In chapter two, I analyzed the motivations and advantages of China’s commercial bank getting involved in PE investment. In chapter three, I go deep into the possible models for our country’s commercial bank joining PE investment with an emphasis of the policy restrictions. In this part, I tried to have every readers understand the characteristics of all the models listed and get an anatomy into how they match each type of commercial bank. In chapter four, I summarized a most suitable model from all above and analyzed how it fit the current financial trend. In chapter five I employed case study to analyze the risk-return status for China’s commercial bank considering factors such as risk management system and the business type. In the final part, I pay my attention to give proper suggestions as how to establish a healthy supervision system on the operation of commercial banks running PE investment.The innovation points are summarized as follow:first, the thesis tried to find the best model that suited the almost all commercial banks on the current stage and then tables an assumption for how commercial banks running PE investment business under the future policy. Second, the thesis gives out a set of risk management measures by thorough case study.In the end, the thesis combines relative theories and China’s current situation to forge useful suggestions for both policy makers and commercial bank managers.