Towards a Collective Regulatory System of Private Equity Funds in China: Legislative Progress and Political Challenges

Abstract

Private equity investment funds have been playing an increasingly significant role in the Chinese economy. Owing to the fragmented financial regulatory regime of the country, however, both the official supervision and self-regulation of private equity funds in China are still problematic, which has increased the potential risk in the market. This article investigates the political logic of the ongoing legislative and regulatory reform of private equity funds in China. It also explores a proposal for the legal reform of the Chinese private equity industry with reference to the experience of the United Kingdom and the European Union. It is suggested that a unified financial regulatory system as a fundamental institutional arrangement is a pre-requisite for establishing an effective and efficient regulatory regime for private equity funds in China. This can only be achieved when the political conflict between different regulators in the Chinese bureaucratic system is removed.