The town of Greenwich, located at the west side of Lower Manhattan, New York city, US, has been home to Wall Streeters favoring a more rural location since the beginning of this century.

Being home to some 400 hedge funds accounting for over $150 billion worth of assets, the small town is known as a rising "hedge fund capital".

Now a number of cities on the Chinese mainland are competing with each other to duplicate the Greenwich model, with successive development plans being published.

The latest plan was presented in Beijing - on May 30, the Fangshan district government in Beijing signed a strategic agreement to develop a "fund capital" in the Beijing suburb, which would attract private placement investment funds, private equity funds, hedge funds and venture capital funds.

Prior to this, similar plans have been initiated in Zhejiang and Sichuan provinces.

"All these 'fund villages' or 'fund towns' have only recently sprung up. This reflects the abrupt increase in demand for wealth management services," said Xu Hao, a fund manager at Guo Tai Asset Management Co Ltd. "The long-lasting bull market since last year has encouraged so many people who used to have no intention to enter the stock market to become investors, so the secondary markets are also driven up," Xu said.

By the end of May, the Chinese mainland had 11,000 management institutions running 11,383 private equity funds worth a total of circa 2.88 trillion yuan ($464.5 billion), according to an earlier Shanghai Securities News report.

The ever expanding wealth of private equity funds is resulting in an increasing number of emerging projects all targeting the possibility of becoming the next Greenwich.

For example, the Nanhu fund town in Jiaxing, Zhejiang province attracted 825 companies whose total combined investment amounts to over 100 billion yuan. And a number of similar projects are funding on a similar scale in Sichuan province's Yibin, Jiangxi province's Jiujiang and Zhejiang province's Hangzhou.

As far as Beijing is concerned, the metropolis is home to 2,505 private equity fund companies with assets totaling 842.3 billion yuan.

The project will be located in Fangshan district, southwest Beijing, less than an hour's drive to downtown Beijing Financial Street.

However, being close to the financial center of a large metropolis is just one of the conditions for becoming the next Greenwich, equally important is the cluster-effect generated by favorable government policy and the integrity of the industry chain.

"If you're trying to say that California is the tech capital of the world, you could probably make an argument that there are more tech companies outside than inside. So why is Silicon Valley the capital? It is because there is a really big cluster in a small area. And the same thing is happening here (in Greenwich)," Bruce McGuire, founder and president of the Connecticut Hedge Fund Association, told local media in a previous interview.

About two decades ago, Greenwich initially benefited from both its location close to New York and Connecticut's advantageous state tax.

Then, in the wake of the 9/11 attacks Greenwich became a kind of escape from Manhattan, before more companies relocated there for lifestyle reasons.

"To ensure the fund towns on the Chinese mainland have similar cluster effect to Greenwich, the local governments will have to provide really good policy guidance for the companies, like tax relief, talent policy and financing policy," said Xu, a fund manager.

Private equity counts for 4 to 5 percent of a country's GDP in most developed economies. And most emerging industries in those regions, including information technology, communication and biomedicine, matured rapidly with the sponsorship of the equity capital market.

"In the future, the mainland's economic developments will no longer rely on State-owned enterprises. Private companies and private equities, like the cells that compose the economy, will have larger role to play," Xu said.

chengyingqi@chinadaily.com.cn

Private equity funds, hedge funds and venture capital funds are going to play a bigger role to propel mainland's economic development in future. Tomohiro Ohsumi / Bloomberg

(HK Edition 06/06/2015 page8)