China regulators reportedly meet with global investors to boost market confidence

The backstory: China and US relations have been getting heated recently, and tensions have been on the rise. On top of that, China's private sector has faced some regulatory crackdowns, and the country’s economic recovery post-COVID has been slower than expected, leading to a dip in interest from US investors, especially from private equity and venture capital firms. Official data shows that private fixed-asset investment shrank by 0.2% in the first six months from a year earlier, while state investments have gone up, highlighting how investors have lost some confidence in the private sector.

More recently: To deal with these concerns, the government issued a statement this month outlining measures to improve the business climate for companies.Chinese President Xi Jinping's administration expressed strong support for the country's private enterprises, promising to make China’s private economy "bigger, better and stronger."

Earlier this month, Premier Li Qiang also gave a nod to new rules for the country’s 21 trillion yuan (US$2.9 trillion) private investment fund market that are meant to help protect investors and promote innovation. While stronger penalties for irregularities are in place, there are also some looser requirements and exemptions that could boost investments.

The development: Chinese regulators reportedly met with some major global investors last Friday to address concerns and boost market confidence. According to insiders, Fang Xinghai, the Vice Chairman of the China Securities Regulatory Commission, met with global fund leaders like Neil Shen from HongShan (which used to be called Sequoia Capital China) and reps from GIC Pte. and Warburg Pincus.

So, what went down at the meeting? The specific deets are under wraps, as those familiar with the meeting requested anonymity. But the agenda was reportedly focused on how to make sure global funds can keep investing in China. The topics ranged from speeding up procedures for overseas initial public offering (IPO) registrations to getting mainland China listings moving faster and even loosening up merger and acquisition rules.

Key comments:

“The policies are a guiding light for the private sector,” said Xiaomi co-founder Lei Jun Lei. “They will be a driving force for high-quality development and scientific advancement.”

"The private sector is a new force to promote Chinese-style modernisation, an important foundation for high-quality development and a key force to promote China's comprehensive construction of a socialist modern power," said state news agency Xinhua.

“It won’t turn sentiment around overnight, but private entrepreneurs do take these signals seriously, so this and similar statements from top leaders make a difference,” said Gabriel Wildau, managing director at advisory firm Teneo Holdings LLC in New York. “A similar statement directly from Xi would have an even greater impact.”

“There’s no such thing as a truly private entity in China,” said Wisconsin Republican Michael Gallagher to reporters earlier this month. “Democrats and Republicans agree that we don’t want to be fueling our own destruction.”