Caixin
Sep 26, 2016 03:42 PM
BUSINESS & TECH

$2.4 Billion Investment Firm Launches in Guangdong

(Shenzhen) — China's largest private provincial-level investment firm started business on Friday with a war chest of 16 billion yuan ($2.4 billion) in Guangdong province, aiming to jump-start a faltering local economy known for its entrepreneurial spirit.

Guangdong, in the country's southeast, was the cradle of modern Chinese manufacturing in the early post-Reform era, drawing on a huge flood of investment and expertise that poured in from adjacent Hong Kong and Macau and nearby Taiwan. But lately the region's manufacturing machine has sputtered due to rising costs and slowing demand for exports that account for much of its business.

In a bid to reinvigorate the market, a group of major local private companies established the Guangdong Non-Governmental Capital Investment Co. with initial capital of 16 billion yuan, and eventual plans to raise that to 50 billion yuan.

The company's 16 founders include Xianfeng Mining Group, home appliance giant Midea Group, and property developer Country Garden.

New CEO Ye Junying said the company was aiming to link up local private enterprises from an array of industries with other potential investors, both at home and abroad.

Before the company's creation, China had 4 similar provincial-level private investment companies, including USUM Investment in the interior city of Chongqing, the first of its kind in China set up in February 2013. That was followed by similar companies in Fujian, Zhejiang and Jiangsu provinces.

Such companies complement more traditional state-backed entities, which also invest in local companies, by placing a heavier emphasis on the private sector.

In June 2015, USUM Investment acquired Chiho-Tiande Group, a Hong Kong company engaged in the recycling of scrap metal, by paying HK$4.4 billion ($567 million) for 32.15 percent of its shares. In March 2015, it provided more than 5 million yuan to establish a recycling company with Sinosteel Investment Group.

The new Guangdong company's launch comes as sluggish economic growth and overcapacity have led many local manufacturers to rein in capital spending. In the first eight months of this year, China's private investment in fixed assets increased by an anemic 2.1 percent year-on-year to 22.5 trillion yuan.

In Guangdong, non-governmental capital investment jumped by 16 percent from the same period a year earlier, slowing from 20 percent growth in May.

Contact reporter Dong Tongjian (tongjiandong@caixin.com); editor Doug Young (dougyoung@caixin.com)

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