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Venture Capital's Blessing

The establishment of the small and medium-sized enterprise board in Shenzhen has absolutely brought glad tidings to all venture capital investment companies in the country, said Wang Shouren, Secretary General of Shenzhen Venture Capital Association.

As China's first region to develop venture capital investment, Shenzhen leads the country in the number of investment institutions and the amount of capital for this purpose. By November 30, 2003, the city had registered 197 venture capital investment companies, or one-third of the national total, which combined to realize one-third of the investment nationwide.

Though the SME board is still not a real second board where all shares have to be tradable, a lot of industry insiders hold its birth deserves warm applause since it gives the venture capital investment companies the first sign of hope.

The establishment of a Nasdaq-style second board in China has been a dream of investment bankers for years. But the venture capital investment industry had to undergo a hard period in the past three years after the government decided to suspend the second board's creation in 2000.

After nearly three years of operation, explained Zhu Fang, Vice President of the Shenzhen Venture Capital Association, a lot of hi-tech projects have finished the incubation period to become profitable in the last two years. He added that since the second board was not in place, the investors had lost a major channel to exit after cashing in on their investment projects and their development had therefore stagnated.

The development of the venture capital investment industry is preconditioned upon the flourishing of small and medium-sized hi-tech start-ups. Official statistics show the country now has more than 1,200 SMEs eligible for flotation on the SME board, bigger than any overseas market in terms of listing resources.

Moreover, the projected revitalization of the venture capital investment industry amid the development of the SME board has again aroused Shenzhen's ambition to become a regional financial center.

Zero2IPO Co. Ltd., one of China's leading venture capital investment companies, has announced to place its emphasis in Shenzhen this year and signed agreements on strategic cooperation with the Shenzhen Venture Capital Association and the Guangdong Provincial Council for the Promotion of Venture Capital Investment. A company executive expressed that Shenzhen has a lot of economically potential projects waiting for investors' discovery and Zero2IPO would build a bridge between project developers and investors.

After the Shenzhen Stock Exchange suspended initial public offerings three years ago, a large amount of securities investment capital has left local market for the country's other stock exchange in Shanghai. As a result, some investment analysts once warned that Shenzhen's status as a financial center is in danger of being marginalized. But, after the SME board's inauguration, a growing number of signs show that Shenzhen, a city known to the world for its enterprising spirit, is regaining investors' confidence.

(Beijing Review June 17, 2004)

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