Too Much State Investment Has a Downside, Investors Warn

While China’s state-backed funds have played an important role in development of some industries, overinvolvement has also hurt market-based private investment, some prominent Chinese private equity investors said.

The sale of huge stakes in portfolio companies by state-backed funds usually swamps the secondary market, said Xu Lin, chairman of the China-U.S. Green Fund, at a global private equity forum Sunday in Beijing. Some owners of companies in which big state funds invested told him that the funds’ exit can crush share prices, Xu said.