Venture capital investment by Chinese-funded institutions surged 186.1 percent in the third quarter of this year from the previous quarter, with 38 contracts signed involving 907.1 million U.S. dollars, according to a recent report by ChinaVenture, a domestic financial consulting service provider.

 

In the third quarter, Chinese-funded and foreign-funded venture capital investment altogether stood at 1.1 billion U.S. dollars nationwide, up 44.3 percent from the second quarter. The money went to 109 deals, said the report.

 

"Although the growth of Chinese-funded institutions in venture capital investment has gained momentum, they lack behind foreign competitors in terms of experience, fund scales and professionalism, "Liu Liang, a senior analyst with ChinaVenture and one of the writers of the report, told Xinhua.

 

He maintained that Chinese-funded institutions were just embarking on venture capital investment.

 

The focus of the venture capitalists had shifted from high-tech industry to traditional industries, namely franchised business, education, manufacturing, media and entertainment and energy industries. The five sectors attracted at least more than 100 million U.S. dollars each in venture capital, said the report.

 

"The research and development threshold of these traditional industries is low. Although return on investment of these industries is relatively low, the growth is quite steady," said Liu.

 

By comparison, the venture capital put into the Internet industry slid from 232.61 million U.S. dollars in the second quarter to 152.01 million U.S. dollars in the third quarter, due to investors' cautious attitudes following market bubbles caused by overheated investment, said the report.

 

"The country is seriously preparing for the setting up of a growth enterprise stock market similar to the NASDAQ to help start-up companies, which helps facilitate robust venture capital investment," Dr. Ou Minggang, the Deputy Chief Editor of the Chinese Banker magazine, told Xinhua.

 

Shanghai ranked first among Chinese cities in terms of venture capital injected in the third quarter, with 387 million U.S. dollars flowing into 27 contracts. It was followed by Beijing, with 35 deals clinched involving 321 million U.S. dollars, according to the report.

 

Founded in 2005, ChinaVenture is a leading industry information provider and its website has become the most popular domestic venture capital portal website.

 

Venture capitalism, also known as risk capital, refers to money invested in start-up firms and small businesses that have both growth potential and the possibility of loss.

 

Ou held that venture capital investment is conducive to long-term economic development and restructuring, as more market mechanisms could be employed to fill badly needed funds for some start-ups, especially those in high-tech, energy-saving and environmental protection industries.

 

(Xinhua News Agency November 20, 2007)