Abstract

This article examines the development of the venture capital (VC) industry in China over the past two decades. In recent years, the industries of interest for investment among VCs spread from information technology to other areas such as the financial services and the heavy manufacturing sectors. From 1990 to 2010, VC seed money and start-up funding significantly decreased, but, pre-IPO VC financing increased considerably. There has also been a shift in the sourcing of VC in the China market away from the few traditional market players such as Japan, the United States, and the United Kingdom in the earlier years. Today, Middle Eastern and European countries (e.g., Israel, UAE, Netherlands, and Finland) are important purveyors of VC.This report summarizes the difficulties encountered in the development of the VC industry in China and provides a number of successful IPO examples of Chinese ventures backed by VCs to illustrate the investment opportunities for VCs.

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