China's state planning agency today submitted a draft set of rules to regulate private equity firms to the country's State Council, which propose raising funds in local currency, a move coinciding with the Blackstone Group announcing last Friday its plan to raise a $732-million Shanghai fund.

China's state planning agency, The National Development and Reform Commission (NDRC), sent the long-awaited draft proposal to the State Council, the country's highest administrative body after two years of intense review and debate, as to how to set rules for setting up private-equity funds, according to The Wall Street Journal citing a Chinese government official.

The move indicates that the Chinese government would soon reach an internal agreement on setting rules and guidelines to oversee and control the private-equity sector in China.

Although there are no clear guidelines on private-equity funds raising money in Chinese currency, a small number of private-equity players and global giants like the Carlyle Group and TPG exists and operate in China on a trial basis.

There are approximately 400 domestic yuan-denominated funds, of which, nearly $1.5 billion have foreign involvement, according to the Journal, citing figures from Howard Chao, partner in charge of O'Melveny & Myers's Asia practice.

China wants to support the local private-equity industry and wants it to play a bigger role compared to overseas firms and manage money of local investors rather than those of foreign investors.