China's First Education Equity Fund Launched in Chongqing.
China's education sector has been drawing increasing attention from international investors in recent years, due to the country's large population base and stable cash flow in the education sector. In terms of value, China's educational market makes up just 2% of the world's total, while Chinese student population, from primary school through university level, makes up 17% of the world's total, according to a report entitled "Enhancing China's Competitiveness through Lifelong Learning" released by the World Bank in 2007. Spending on education accounted for 17.8% of the total expenditures on consumption of services in Beijing in 2008. Spending in the categories of education, culture and recreation accounted for 15.7% of the total expenditures on consumption of services in Shanghai in 2008, compared with 11.9% in Guangdong for the first half of 2009. China's spending on education is relatively low compared to Japan, where such spending accounted for 34.1% of total household income for the 2007-2008 year. However, China's private schools are expanding rapidly, with an annual growth rate between 20 and 30 percent. Because of China's rapid urbanization and development, it is expected to become the educational and vocational training market with the largest development potential worldwide over the next decade, offering huge potential for investors. The World Bank report also shows that even in the economic downturn, the education, healthcare and high-tech sectors still outperform other sectors, as people have more leisure time and see an improvement in their own level of education as a way of riding out or even shortening the economic downturn.
At present, expenditure on education in China accounts for 5% of the GDP, while the government's participation in the expenditure accounts for only 3% of GDP, far below the projected need of 6% and 9%. The United States, where education is highly valued, is home to over 30 publicly traded companies in the education sector and thousands of private schools. However, not one company in the education sector has an A-share listing in China. Currently, 330 million members of the Chinese populace, a total equivalent to the entire population of the United States, are in school. Based on statistics and the development trend of China's education sector, analysts believe that although some venture capital and private equity firms have invested in several Chinese educational and training institutions, among them Ambow Education, Oriental Standard, Xueda Education and Oriental Babycare, China's educational sector still has huge investment potential.
China's educational and training companies that have listed on overseas markets have brought investors stable returns. Statistics show New Oriental Education & Technology Group (NYSE EDU) posted net revenues of US$292.6 million and net profit of US$77.8 million for the 2009 fiscal year, with profit margin reaching 27%. The company's closing price on December 24, 2009 stood at US$75.75 per share, while the original IPO price in September 2006 was US$15 per share.
Huiou (Chongqing) Education Equity Investment Fund held an introductory informational meeting on December 27th, marking the prelude to the Fund's series of road shows. Prior to that, many funds and investment institutions expressed strong interest and an intention to invest at an earlier recommendation meeting. Sources have indicated that the fund's management team, comprised of a group of professionals who are active players in Chinese and international capital markets, will seek out education and education-related firms engaged in the cultural and media sectors as their main investment targets, aiming at making the Fund the leader and the top brand in the field of educational investment in China. The Fund plans to raise a total of RMB5 billion (USD 735 million), with RMB200-500 million (USD 29-74 million) for the first phase and RMB2 million (USD 0.3 million) as a fund unit, with an operating period of 5+2 years. At present, the Fund is closely working with the responsible government departments, as well as interested banks, brokerages and other financial institutions in Chongqing, in a move to develop strategic cooperations. Following a successful completion of the fundraising, the Fund plans to support the outstanding performers among its list of target companies in their efforts to go public in the Chinese or international markets when the time is appropriate. The Fund's managers will apply professional investment management methodologies, scientific decision-making processes and effective risk control strategies, while operating in accordance with industry-wide accepted standards so as to provide a safe investment channel for Chinese and foreign investors seeking to share the benefits from the high-speed growth of China's education sector by participating in this venture.
Significant progress in the establishment of partnership businesses in China by foreign companies has been achieved as the State Council of China had released the Measures for Administration of Establishment of Partnership Enterprises by Foreign Enterprises or Individuals within China in early December. These measures establish a legal basis for attracting foreign private equity to establish partnership businesses across the country. Some experts in the field believe that foreign equity funds investing in the country should be placed at the third stage of the introduction of foreign direct investment by China. Private equity-led overseas financial capital has been entering the Chinese mainland on a large scale since 2000, following Hong Kong and Taiwan enterprises that started making investments in the Pearl River Delta with new set-ups to engage in the "three-plus-one" trading-mix in 1978, and multinationals that have made large-scale strategic investments in China beginning in 1992. Moreover, the mainland Chinese ChiNext, launched at the end of October 2009, has established a good circular model of private equity placement, investment and successful exit at maturity. Very coincidentally, the OTC, known as "the third board" financial market, opened in Chongqing on the same day of the fund's inception, providing smoother and more convenient channels for withdrawals of private equity funds in the future. In terms of flexibility and efficiency, equity investments have more benefits than banks and other traditional financial channels. For this reason, Chongqing's municipal government has expressed a special interest in the start-up Huiou Fund. Beginning last year, Chongqing's municipal government has released the Opinions on Encouraging Development of Equity Investment-Oriented Enterprises and put in place a series of incentive policies for equity investment funds in terms of taxation, approvals and foreign currency exchange. Mayor Huang Qifan in particular noted the goal of making Chongqing a venue for gathering venture capital and equity investment funds in China.
"Strong support from the government, a professional management team, excellent project reserves, close co-operation with professional services firms both in and outside China, as well as the in-depth understanding of the local business environment are among the many advantages of our fund management. A strong sense of commitment and confidence play as the drivers of our fund growth; meanwhile, the pre-referral has laid a solid foundation. We will continue to work closely with more powerful investors to share good opportunities and strong returns brought by China's booming education industry," a representative of Huiou Fund stated, "We have also established the Huiou Education Charity Fund which aims at helping students without means in the western areas of China in a move to provide access to good educational opportunities for more people."
For more information, please contract: Chongqing Huiou Equity Investment Fund Management Co., Ltd. Liu Zuolin Chairman Mobile: +86-158-2349-5406 Roger Wang Investment Director Mobile: +86-138-8322-4986 Email: firstname.lastname@example.org
SOURCE Huiou (Chongqing) Education Equity Investment Fund
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|Date:||Jan 4, 2010|
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