Buyout firms have invested more than $4 billion in China this year, compared with only US$723 million in 2003, according to market data firm Dealogic.

But while China's nearly 10 percent economic growth and increasing domestic consumption make for tempting opportunities, regulatory constraints and underdeveloped capital markets make it difficult to put that money to work.

Carlyle Group in October announced a deal to pay US$375 million for 85 percent of Xugong Construction Machinery Group, China's biggest construction gear maker.

The deal has hit snags as Beijing has tightened controls on foreign investments, including stakes in domestic equipment makers, highlighting the market's regulatory risks.

Both Blackstone and KKR expanded into Asia for the first time ever last year, an arrival that came long after Carlyle, Texas Pacific and Warburg Pincus established investment teams in the region.  

KKR chose to set up shop in Hong Kong and has already made deals in Australia, Singapore and India.

1

2

(For more biz stories, please visit Industry Updates)