BEIJING—Hong Kong-based H&Q Asia Pacific is planning to raise its first yuan-denominated private-equity fund in mainland China, said Chairman Ta-lin Hsu, joining a slew of foreign investment managers seeking to tap the country's growing wealth.

"We've seen a surge in interest from domestic investors" for private-equity funds, Mr. Hsu said in an interview. He said the firm will target both Chinese institutions and individuals, but declined to disclose more details on its fund-raising plan.

Private-equity capital raising in China, negligible only a decade ago, has been booming after a dip in 2009 at the height of the global financial crisis. Chinese officials have been encouraging such funds as a way to help provide financing to small businesses. Meantime, China's savers, institutional or individual, are eager to find uses for their money other than having it sitting in banks for paltry returns.

But until recently, dollar-denominated funds had dominated China's private-equity industry, as many big Chinese institutions such as insurance companies were largely barred from investing in private equity, while overseas investors were eager to invest in China.

Now, yuan-denominated funds have become all the rage with fund managers, especially those from outside mainland China, as yuan funds subject fund managers to less red tape than dollar-denominated funds. Yuan funds are designed in part to help foreign firms get past issues that have often complicated investments from their dollar funds into China.

In the past year, global firms including Blackstone Group LP, Carlyle Group LP and TPG have all launched yuan funds in China.

From January to November, private-equity firms raised $19.8 billion of yuan funds, according to Zero2IPO Research, a Beijing-based firm that tracks China's private-equity industry. That accounted for 75% of all the private-equity funds completed in the first 11 months of the year. The rest of the funds are denominated in dollars.

Mr. Hsu said H&Q will continue to raise dollar funds aimed at Chinese investors seeking to invest overseas, as well as foreign investors looking to get into the Chinese market.

Indeed, many analysts have said U.S. dollar funds will keep a prominent place in China until the yuan becomes fully convertible and acceptable to the rest of the world.