Hedge fund industry in China

Currently hedge funds in China fall into two categories. One is those companies backed up by the government, including brokers managing pooled property, trust and investment companies' trust and investment projects, and investment companies managing their own capital.[2] The other is private hedge funds. Under the name of "Investment Consulting Company" or "Investment Management Company", they provide management for pooled property.[3] Examples of notable private hedge funds include Hillhouse Capital Group, High-Flyer and Ubiquant.

Against the background of China's fast growing economy, the number of hedge fund investors is increasing rapidly in the country, and the total amount of their wealth is increasing in step. By the end of June 2008, China's residents had RMB 19,460bn ($2,820bn) in bank deposits, of which 80% was in the name of 20% of the population. With such a huge amount of cash assets in hand, the wealthy's strong investment demand has provided hedge funds in China with a sufficient supply of capital. In addition, China's companies also have a huge sum of spare cash, which is also a primary source of capital for hedge funds.[4]

Data showed that hedge funds account for 0.6% of the GDP in the US, 0.35% in Europe, 0.2% in Asia, while only 0.1% in China. It is expected that China's GDP would quadruple in 10 years time and hedge funds would be about 0.4% of the country's GDP. In this case, China's hedge funds would expand 12-fold, and place China second in the world for hedge fund investments.[5]

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