News is slow coming out of China during the best of times. During Chinese New Year in the "Year of the Dog," make that at a complete standstill. A survey by the influential China Venture Capital Research Institute located in Hong Kong and administered by the capable, Dr. Gongmeng Chen, indicates that China's venture capital size will continue to expand, but the chasm between domestic and foreign venture capital firms will widen.

Internet and software industries remain hot investment areas for venture capital firms. Additionally, the VC industry expects to see further focus on the life sciences, network communication and online media in 2006.

Since the introduction of venture capital in the 1980s, China has made significant policy and regulatory improvements to drive the development of the nascent industry. The rapid rise of the Small and Medium Enterprise Board established less than two years ago in Shenzhen has helped to broaden the financing channel of small and medium enterprises.

As one of the places established the mechanism for venture capital investment earlier across the country, Shenzhen was the first to release a series of policies to support venture capital and hi-tech industries.

Cheng Siwei, Vice Chairman of the Standing Committee of the National People's Congress reaffirms that the Shenzhen Securities Exchange Small and Medium Enterprise Board generates important and profound significance in the developing history of China's capital markets.

In 2003, newly added investment in the city was nearly $186 million. However, proportion of venture capital declined from 26% to 17% between 2004 and 2005.

Conversely, the venture capital investment in western China only took around 10% of the whole country during the two years, but the proportion went up to 20.4% from 4.3%, closely following that in Shanghai and eastern China.

The adage "go west young man" now takes on new meaning for both the domestic and foreign venture capitalist in China.