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CVCRI issues 2005 China VC industry report

By Li Huayu (chinadaily.com.cn)
Updated: 2006-04-08 09:50

China's venture capital (VC) industry in 2005 took on 10 features according to a report issued by the China Venture Capital Research Institute (CVCRI), which carried out an investigation from October 2005 to January 2006 on organizations engaged in VC investment in the nation's 24 provinces, municipalities and autonomous regions including Beijing, Shanghai and Shenzhen.

The first feature is that China's VC keeps growing steadily, with a continued rise in newly raised capital. By the end of 2005, venture capital invested in the Chinese mainland reached 46.45 billion yuan, 2.58 billion yuan more than the 43.87 billion yuan a year ago.

Second, VC is active in economically developed areas, with western China becoming a new investment spot favored by venture capitalists. According to the report, venture capital raised and invested in Beijing (31.2 percent), Shenzhen (17.5 percent) and Shanghai (11.2 percent) accounts for 60 percent of the nation's total.

Third, foreign VC keeps flooding into China and foreign capital, enterprises and governments become main VC sources. According to the report, among 95 valid questionnaires collected, foreign capital ranked the most to reach 14.23 billion yuan, accounting for over 1/3 of the total VC raised, followed by investment made by enterprises with a total amount of 12.90 billion yuan; and then governmental capital of 8.86 billion yuan.

Fourth, the distribution of VC managed by Chinese and foreign organizations is quite different. Venture capital managed by domestic organizations is distributed evenly, with VC managed by 25.5 percent VC organizations being between 200-400 million yuan, and 23.5 percent, between 50-100 million yuan, and 20.0 percent below 50 million yuan. As for foreign ones, 38.7 percent is between 200-500 million yuan, 16.1 percent between 100-200 million yuan, 9.7 percent between 50-100 million yuan, and 6.5 percent below 50 million.

Fifth, the gap between domestic and foreign VC organizations is further enlarged with increasingly evident marginalization. Sixth, Internet and software industries are much favored, and China's VC industry is expected to see another boom. Seventh, products in the seedling period are difficult in raising fund, and the growing-up period is easier to gain fund. Eighth, the exit of VC mainly takes the form of stock transfer, with IPO becoming more and more prevalent. Ninth, new energy, biological technology and Internet, etc will become the focus of investment in the next couple of years. Tenth, the government still needs to improve taxation and other policies governing the industry's development.