(For other news from the Reuters China Investment Summit, click on http://www.reuters.com/summit/ChinaInvestmentSummit09)
* Sees China IPO as an exit channel for portfolio firms
* Says overseas-listed companies interested in coming back
* More companies prefer China IPO as yuan funds grow
By Michael Wei and Doug Young
BEIJING, Sept 1 (Reuters) - Global private equity funds expect domestic listings of Chinese companies to become an alternative avenue for foreign investors to exit their investments as Beijing relaxes rules, a top dealmaker told Reuters on Tuesday.
As Chinese capital markets become more friendly to privately held and foreign-invested companies, exit strategies for global funds will be diversified, Neil Shen, China founding partner of Sequoia Capital, said at the China Investment Summit.
"I see multiple investment formats as well as different exit possibilities -- domestic A-Shares, Hong Kong, Nasdaq and the New York Stock Exchange. Different companies are different."
"We do hope that in the near future some of our portfolio companies might appear in the A-share market," said Shen, who helped to set up the China arm of Sequoia Capital, a top U.S. venture capital firm, in 2005.
Dealmakers for global funds like Sequoia Capital and the Carlyle Group [CYL.UL] have been rapidly expanding their investments in China in past years to share in the strong growth of its economy, the world's third largest.
However, many Western firms at one time complained that the going was tough in China, where private equity-owned companies faced more difficulties in securing regulatory approval for a public listings on domestic stock markets, eliminating a key avenue used in other developed countries to exit investments.
Since last year, Beijing, which has typically viewed private equity funds as speculators, is becoming more welcoming of them investing in China, thereby creating more jobs.
The government is also ready to launch a Nasdaq-style market in Shenzhen, bordering Hong Kong where many foreign funds have already floated shares of their portfolio firms for years, to attract listings of growth-stage companies.
UNDERSTOOD AT HOME
Sequoia Capital currently manages $1.15 billion of assets in China, with nearly 50 portfolio companies in the country.
Its recent investments include China-focused milk powder
maker American Dairy Inc
American Dairy is already listed in New York, while Poly Bona has said it aims to list abroad in the coming years.
"There will be diversified exit alternatives," said Shen, adding that companies receiving investments from U.S. dollar funds may prefer listing abroad, which will be easier for foreign investors to exit.
Asked whether those overseas-listed companies may do a secondary listing in China, Shen replied: "In general, I think a lot of those companies will be interested to come back."
"They obviously still need to work out regulatory and other requirements," he added.
Public understanding and acceptance is a key factor for companies to choose the location of a share offering, Shen said at the summit, held at the Reuters office in Beijing.
"Indeed, I see there are companies that are more willing to list themselves on the domestic stock exchange whereby they want renminbi funds," he said, referring to the domestic currency also known as the yuan.
"Certain industries are better understood domestically, so there is a better investor base," Shen said.
In 2008, Shen raised a 1 billion yuan ($146.4 million) in a
yuan-denominated fund in a move welcomed by the government and
soon copied by others such as Blackstone Group