Chinese Venture Capital Ushers in Thunder & Rainmakers

Filed in archive Mergers and Acquisitions on July 22, 2005

A dramatic transformation is sweeping across the Pacific. For two decades, Asia watchers have proclaimed the dawning of a Pacific Century that is waking up the West like thunder out of China. China's unprecendented economic boom with its robust juggernaut engine fueling a 9.5 percent growth is the catalyst responsible for an Asian private equity capital tsunami spilling into new provinces and science and technology parks throughout the Middle Kingdom.

"Chinese venture capital is alive, well, and accelerating at warp speed," exclaims Dan Schwartz, publisher and editor of the Asian Venture Capital Journal in Hong Kong.

An increasing number of Asian fund managers, particularly those with stellar performance investment records are even doubling the size of their oversubscribed investment funds. For example, JP Morgan Partners Asia operations reveals in recent releases that it intends to double its current fund size to a ballooning $2.2 billion.

Despite reports that China private equity deals fell more than 44 percent during the first half of 2005, , one of Silicon Valley's biggest venture capital firms, announced only last week, that it would team up with the venture capital arm of the International Data Group, the American publisher and media company, to create a $250 million fund to invest in Chinese technology companies.

IDG's bold chairman, Patrick McGovern a pioneer in China set up its first venture capital operation in China in 1989 and now has established venture capital management companies in Beijing, Shanghai, Guangzhou, Tianjin and Shenzhen.

Asia Private Equity Review a monthly published also out of Hong Kong reports that overall Asian private equity reached $3.5 billion during the first five months of 2005. Contrast that with last year's figure of $1.4 billion over the same period and it's no wonder that Asian private equity thunderous investments pushes away any clouds attributed to an overheated economy, trade imbalances and restricted management buyouts.

According to Kathleen Ng, a friend and respected editor of Asia Private Equity Review, the China private equity market is in decline. In comparison of the figures from the first quarter 2004 to the same period 2005, there's a dramatic decline in the number of deals from twenty to nine and the value of overall transactions, has plummeted from $481 million to $170.5 million.

I welcome your views and comments on this new blog. Let's hear from those venture capitalists about their views on the New China venture industry and separate a few myths from realities.