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Foreign firms seen dominating China venture capital market in next 5 yrs
Foreign firms will be the major players in China's venture capital market until at least 2010 with Internet-based companies currently offering the best returns, Zero2IPO founder and chief executive officer Gavin Ni said.
'For about (the next) five years, foreign (firms) will dominate China's venture capital market,' he said at a conference in Beijing.
His comments come as Zero2IPO and the China Venture Capital Association released their joint survey on the industry.
Ni said that many foreign venture capital firms had internal return ratios of over 100 pct, while most local currency funds had estimated internal return ratios of below 10 pct.
He also said that Internet-based companies have given investors the greatest returns, especially in the last two years.
The survey found that 12 bln usd had been raised for investment in China from 1993 to 2005.
It also said there were 80 active venture capital funds in China, split into local currency funds and US dollar funds.
Among the 50 most active venture capital funds in China from 1998 to 2002, about five had estimated internal return ratios of above 40 pct and 15 recorded ones of 10-40 pct, with most local currency funds returning lower ratios.
In the first three quarters of 2005, China saw 11 venture-capital backed initial public offerings (IPOs), compared to 24 in all of 2004, according to the survey.
Of those IPOs this year, 23 pct each listed on the NASDAQ and on the Hong Kong main board, 22 pct on the Hong Kong GEM market for start-ups and smaller cap firms, with the remainder on domestic or other offshore exchanges.
While 23 pct of these IPOs were in 'traditional' industries, the survey identified 13 pct in the telecommunications industry and 11 pct were Internet firms. No other breakdowns were given.
From 2002-2004, China saw 55 IPO exits raising more than 600 mln usd. China's top exits via public listings have been Shanda, Baidu, Ctrip, and Focus Media, Ni said.
In the first three quarters of 2005, seven venture capital-backed mergers and acquisitions were recorded in China, compared to 12 in 2004. The telecom and Internet industries accounted for 10 pct and 11 pct respectively of the year-to-date total.
From 2002-2004, China recorded 192 venture capital-backed mergers and acquisitions amounting to 100 mln usd.
Ni said the rate of mergers and acquisitions will increase 'dramatically' in the future.
He said that, aside from Internet-based companies, there are opportunities in China's growing health care industry.
'Health care is a very big industry in the US but in China it's under-invested,' Ni said.
The chief executive said he expects an increase in venture-capital backed IPOs as well as mergers and acquisitions in future.
While some bubbles do exist in China's venture capital market, the industry is experiencing 'very healthy growth,' he said.
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