Exit of Chinese venture capital

Abstract

The third chapter examines the current legal impediments which substantially reduce the efficacy of the incentive mechanisms concerned with the operation of Chinese domestic venture capital. Following an examination of the operational phase, this chapter will move forward to the last stage of the cycle of venture capital – the exit. The American experience of this phase tells us that a fair and efficient stock market is vital for the exit of venture capital from its successful portfolio companies. Unfortunately, the current multi-tier stock market in China, including the Main Boards, the SME Board, and the GEM, cannot offer smooth exit channels for Chinese domestic venture capital, either because of demanding listing rules or because of problematic listing approval systems. Confronted with this unsatisfactory situation, legal reforms must be carried out as quickly as possible.