(Adds limited partners, sectors and background)
By George Chen
SHANGHAI Nov 10 SB China Venture Capital, backed by Japan's Softbank Corp (9984.T), is raising its first yuan-denominated investment fund with an initial target size of up to 2 billion yuan ($293 million), people with direct knowledge of the matter said on Monday.
SB China aims to complete the fund-raising before the end of this year or early next year and it will cooperate with an investment arm of the Shanghai city government to launch the fund, said the sources, who declined to be identified before an official announcement is made to the public.
The fund, to be managed by SB China as its general partner, will focus on the fast-growing high-technology sectors in China, especially in Shanghai's Pudong New Area, they said.
SB China expects to attract capital from Chinese limited partners in eastern China, in particular Shanghai, Zhejiang and Jiangsu where the private economy is strong and growing rapidly.
"Yes, the market environment is tough, but demand for investments and wealth management services from these rich private entrepreneurs in China remains strong," said one of the sources.
"Ideally, it would be great to raise 2 billion yuan but it would also be good to get a number like 1.5 billion yuan in the end," he added.
Shanghai Pudong Science and Technology Investment Co Ltd, a city government-owned investment agency founded in 1999, is expected to become a major limited partner of the fund, the sources said, adding that no final agreement had been reached.
FOCUS ON HIGH-TECH
In 1990, Shanghai got the blessing of China's paramount leader Deng Xiaoping to transform Pudong, a backward rural district opposite the city, into Asia's future financial centre, that would one day surpass Hong Kong.
Pudong, formerly a marshland where Shanghai's vegetables were grown, was once described by visiting Nobel Laureate Milton Friedman as a huge white elephant, much to the embarassment of his Chinese hosts.
To turn Pudong into a showcase for the world, the Shanghai government's priorities are to develop the Lujiazui financial district, often dubbed as China's emerging Wall Street, and Zhangjiang Hi-tech Park, China's so-called Silicon Valley.
"To cooperate with Pudong New Area will be a shortcut for Softbank to tap the ample resources of high-tech companies based in Zhangjiang," said another of the sources.
The first yuan fund of SB China will not only invest in high-tech sectors but also look for investment opportunities in China's growth-stage companies in new energy, new material and manufacturing sectors, the sources said.
SB China, founded in 2000, has made a number of landmark deals, focusing on technology, media and telecom sectors. Its portfolio includes many market leaders such as Alibaba.com Ltd 1688.HK, China's top e-commerce firm, and Focus Media Holding Ltd FMCN.O, China's top digital advertising firm. ($1=6.823 Yuan) (Editing by Jacqueline Wong)