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Xiamen rolls out policies to support development

ftz.xm.gov.cn|Updated: March 30, 2023

The administrators of the China (Fujian) Pilot Free Trade Zone's Xiamen Area have issued a guideline to boost the development of private equity funds of funds, or FOF, with the Huli district of Xiamen city, located in East China's Fujian province.

The document, released last September, came into force on Oct 1 and will expire at the end of September in 2025.

As the first of its kind in China, it is expected to help support measures introduced by local governments for equity investment companies and boost the development of the funds of funds method of private investment.

Under the document, the measures are applicable to FOFs and their management companies. They must have jointly been brought in by the Xiamen Area's administrative committee and Huli district and have opened custody accounts of 5 billion yuan ($725.4 million) or more at financial institutions in Xiamen.

The management of a FOF will be given a one-time grant towards its settlement in the Xiamen Area after the fund provides capital to its participating sub funds.

With paid-in funds of no less than 5 billion yuan, the management company may receive a 8 million yuan grant. When the funds reach 10 billion yuan, that will be increased to 10 million yuan.

An 80 percent grant will be given respectively to the FOF and the management company for their increased operating revenue and main business profits – and to the FOF management team for their economic contributions to the Xiamen Area and Huli district.

The FOFs are being encouraged to invest and establish sub funds in the Xiamen Area and in Huli. If their cumulative investment reaches 1 billion yuan, the members of the FOF management team will be rewarded, based on actual paid-in funds.

FOFs that have sub funds worth 1-5 billion yuan will be given grants of 200,000-500,000 yuan. A top amount of 600,000 yuan will be given to the FOF with a sub fund of more than 5 billion yuan.

The document also provides rent subsidies to qualified FOF management companies.