Big drop for venture capital, private equity investment in China last year

15:17, June 22, 2010      

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In 2009, there were 50 percent fewer venture capital and private equity investment cases in China, according to statistics from Zero2IPO, a Web site that compiles investment information on China.

The number of investment cases dropped from 428 in 2008 to 213 in 2009. The total sum of money invested dropped from 11 billion U.S. dollars in 2009 to less than 3.8 billion U.S. dollars in 2008, a decline of 66 percent. When compared with 2007, the investment cases and amount of investments decreased by 53 percent and 74 percent, respectively.

Due to the global financial crisis in 2008, the number of investment cases and total amount of investment dollars of foreign venture capital and private equity in the Chinese market began decreasing after experiencing an investment peak between 2006 and 2007.

However, thanks to venture capital and private equity's characteristics – one being that the funds normally have five-to-seven years of duration – the drastic shrinkage phenomenon of overseas limited-partner capital spurred by the crisis was not immediately reflected in investments. The foreign venture capital and private downturn did not appear until 2009.

Regarding the investment industries in China's venture capital market, the IT industry is still the most favored investment scope of the foreign venture investment institutions. Due to this crisis, the foreign venture investment institutions have been increasing the investment shares in traditional and service industries in recent years. In terms of venture capital industries in 2009, the investment cases of traditional industries accounted for 13 percent and the investment amount reached almost 25 percent, hitting a new high.

The Zero2IPO Database also shows that the consumption industry has attracted about 6.9 billion U.S. dollars of investments from private equity funds in 2009, accounting for 79 percent of total investment amounts and more than 50 percent of investment cases that year.

From China's private equity market investment industries between 2006 and 2009, the foreign capital has been focused on the traditional and service industries, which are closely related to people's basic necessities. Especially after the financial crisis broke out in 2008, the resistance power of the consumption industry made foreign investors further increase the proportion of their investments in traditional and service industries.

By People's Daily Online

(Editor:祁澍文)

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