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Lehman Brothers and IBM plan on Monday to announce a $180m joint-venture fund to invest in public and private companies in China.
The fund, believed to be the first such joint venture between an investment bank and a top industrial company, underscores the fierce desire of Western groups to cash in on China’s booming economy.
The fund plans to target a range of sectors for investment including technology, telecommunications and industrial groups, and will attempt to transform the financial practices and information technology systems of companies in which it invests.
The fund will officially operate from Lehman’s offices in Hong Kong but will also operate from IBM’s Beijing office.
Instead of focusing on early-stage technology companies, as many venture capital groups do, the Lehman-IBM fund will focus on more well-developed groups, both public and private, that show potential for rapid growth.
Lehman and IBM executives said they planned to put money into companies for about five to seven years before cashing out.
“Both of our organisations believe China is just a huge opportunity on the growth side,” said Michael Odrich, head of private equity at Lehman. “IBM is already a leading brand in the Chinese marketplace, and Lehman is very committed to growing our business in China.”
Lehman Brothers earlier this year said Asian expansion was its top priority.
IBM and Lehman executives said they were working closely on the project with the Beijing government, which has charged Chinese companies with hastening their pace of modernisation.
Other investment banks and global corporations have been scrambling to increase their presence in China, where the economy is on pace to grow at faster than 10 per cent for the fourth year in a row.
Goldman Sachs made a paper profit of $3.9bn on its investment in the recently floated Industrial and Commercial Bank of China. Allianz saw a $1.5bn paper gain in the ICBC float, the largest ever initial public offering.
Morgan Stanley recently acquired a coveted Chinese commercial banking licence, allowing the bank to offer renminbi-denominated products to mainland corporations.