Minimums set for PE, VC investing

China has set a minimum amount that a single investor can put into a venture capital or private equity fund in an attempt to help the sector develop steadily, according to an official at the National Development and Reform Commission.

"We set the threshold at 10 million yuan ($1.6 million)," said Liu Jianjun, director of the financial affairs division of the commission's Department of Fiscal and Financial Affairs. "We are paying attention to how the market reacts and are likely to adjust the threshold accordingly."

In December, China issued its first national regulations governing equity investments in unlisted companies. Officials then merely suggested that when individual investors make such investments, they put at least 10 million yuan into them.

The commission later decided to turn that guideline into a hard-and-fast rule and apply it to every equity investment fund that it had registered. To be registered with the commission, a fund must have assets worth more than 500 million yuan.

"The industry is full of risks, and it makes sense for people who can bear high risks to invest," said Liu, adding that investing for the long term is encouraged.

Besides institutional investors, the commission also encourages the wealthy to invest in venture capital and private equity funds, Liu said.

"Venture capital and private equity are good ways for companies to raise money and for the nation to reform its economy," Liu said. "But there has been some illegal fundraising."

Liu said China was estimated to have more than 10,000 venture capital and private equity firms at the end of 2011. They then managed nearly 2 trillion yuan in total assets.

"We expect the new regulation will help the sector develop better," Liu said.