A Chinese entry strategy is a much sought after golden fleece for any company. Yesterday Carlyle, the US-based private equity fund, became only the second foreign company to announce its plans to raise a renminbi-denominated fund in China. Its agreement with the Beijing local government will let it replace its offshore dollar fund.

The benefits are clear. First, fewer regulatory hurdles will speed up deal-making. More important are the connections with the Beijing government. But perhaps the biggest benefit of all is the kudos that having such a plan gives Carlyle. It is no coincidence that the only other scheme comes from Blackstone, its listed private equity rival. Only weeks after Carlyle's successful $3.1bn initial public offering of China Pacific Insurance, the timing could not be better as it looks towards its own potential listing.

But the challenges are vast. The Ministry of Commerce, China's competition watchdog, has shown little reluctance to scuttle deals with foreign buyers. Last March it killed Coca-Cola's $2.4bn bid for juice maker China Huiyuan, aiming to protect a popular local brand. Carlyle itself felt the sharp end of the same regulatory stick after agreeing the $375m buy-out of construction equipment manufacturer Xugong Group in 2007, only to see Beijing jump in and block the deal.