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New fund taps Euro-China relations

Tourism, travel and manufacturing are the targets of investment worth up to HK$15 billion.

The growing importance of China's relationship with Europe, already China's largest trading partner, is the driving philosophy behind a new fund launch.

Based in Hong Kong and Beijing, the Euro-China Fund is being launched by limited partners Siemens, BASF, Zurich Insurance Company, Mannheim LLC and general partner First Eastern Investment Group, a leading domestic private-equity group in China.

The fund is targeting a close at the end of 2005 and a minimum capital commitment of €100 million.

That might seem modest given the size of China's economy, but Victor Chu, chairman of First Eastern Investment Group, believes given correct structuring and leverage, the capital is more than sufficient.

"It is a HK$1 billion fund," he says, "and will typically co-invest between 20% and 25% per project, so that's a five-time multiplier.

"Plus for every dollar of equity, we can add three dollars of debt. It gives us the capacity to invest up to HK$15 billion (US$1.9 billion). And First Eastern has a further US$400 million of capital and the likes of BASF and Siemens have very deep pockets."

The fund is aiming to invest in business areas that involve growing trade and investment flows between Europe and China as well as opportunities that help European and Chinese businesses work more efficiently together through market access, technology transfer and/or strategic alliances.

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