By PETER STEIN
HONG KONG—Goldman Sachs Group Inc. and Morgan Stanley are both launching private-equity funds denominated in China's currency, the latest moves by foreign financial firms to expand their presence in China.
Western firms increasingly are trying to launch yuan funds as a way of doing deals in China. The big players have concluded fewer restrictions will be placed on yuan funds raised from domestic Chinese investors than from dollar funds raised from foreign investors.
On Thursday, Goldman signed a deal with the Beijing government to launch a yuan-denominated fund that aims to raise 5 billion yuan ($770 million), according to a person familiar with the situation. The fund doesn't have a specific focus.
The deal has received all the necessary regulatory approvals, the person said, and was signed Thursday in Beijing at a ceremony attended by Lloyd Blankfein, Goldman's chief executive and chairman, as well as the mayor of Beijing, Guo Jinlong.
Goldman's private-equity arm will manage the new fund, which Goldman and the Beijing government will seed with their own money while seeking other investors among wealthy individuals and institutions in China.
Morgan Stanley is expected to announce details of a yuan-denominated private-equity fund in Hangzhou next week, according to people familiar with the matter. The Wall Street firm is partnering with Hangzhou Industrial & Commercial Trust Co., in which Morgan Stanley already holds a roughly 20% stake, the people said. It wasn't immediately clear how much the fund is expected to raise or whether it will have a specific focus.
Some of the world's biggest private-equity firms already have launched funds similar to those Goldman and Morgan Stanley are raising. The Beijing city-owned holding company that is teaming up with Goldman also has partnered with Carlyle Group in a private-equity fund denominated in China's currency, also known as the renminbi. TPG and Blackstone Group LP have launched yuan funds as well.
For years, foreign private-equity firms have struggled to do sizeable deals in China with the dollar funds they've raised abroad. Most deals involve minority stakes, rather than outright control, and entail much red tape.
The foreigners, however, face intense competition from an increasing number of Chinese private-equity funds raising yuan competing for many of the same deals.—Eliot Gao in Beijing contributed to this article.
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