Venture capitalists expect upturn in investment outlook in China

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Last updated at: (Beijing Time) Thursday, November 13, 2003

Venture capitalists expect upturn in investment outlook in China

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Venture capitalists (VCs) in Hong Kong and the Chinese mainland are becoming more optimistic about the future economic climate -- a significant rise in economic confidence compared with two quarters ago, says a recent TMT (Technology, Media & Telecommunications) Venture Capital Survey conducted by professional services organization Deloitte.

This quarterly survey was carried out among VCs in Hong Kong and Chinese mainland in September, 2003. Results show that 73 percent of respondents believe there will be economic improvement over the next six months, while none of them believe the economic climate will decline during the same period.

Of the Asia Pacific countries where the VCs have an investment interest, China remains the hottest geographic location for new investments despite a decline in interest from quarter two, the survey indicated.

The software, telecom and semiconductor sectors continue to be the hot picks for VCs who are expecting an increase in transactions over the next six months in these areas.

"The end of the SARS threat and the recent signing of the Closer Economic Partnership Agreement between Hong Kong and the Chinese mainland are attributable to this marked increase in economic confidence," said Lawrence Chia, managing director of Deloitte & Touche Corporate Finance Ltd.

The rebound of economic confidence among VCs is also reflected in their preference for larger-scale investments and their increasing attention to new investments. For example, nearly two-thirds of the respondents showed of quarter three a preference for investments over 10 million US dollars, compared with the majority(75 percent) of the quarter two respondents who indicated a preference for investments under 10 million US dollars.

Instead of focusing on managing existing portfolios, two-thirds of quarter three respondents indicated that they would spend the majority of their time focusing on new investments. This contrasts with only one-third of quarter two respondents who said they wouldlook to new investments.

The TMT Venture Capital Survey is carried out on a quarterly basis by Deloitte & Touche Corporate Finance Ltd and the TMT Industry Group of Deloitte. It aims at providing a snapshot of VCsexpectations for the coming six months in terms of economic and market climate, deal activities and investment focus.

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