Sharp fall in VC/PE transactions

China's venture capital and private equity sector is seeing a sharp decline after expanding rapidly in the past few years, market watchers said Thursday.

The VC/PE sector grew rapidly to a peak in investment deals in 2010 but in October only 19 investment deals worth a total investment of US$472 million were sealed - marking the lowest level so far this year, according to Beijing-based Zero2IPO Research Center.

"One of the major problems facing PE firms in China is that funds tend to get in and out quickly rather than staying for long-term value development," Zhao said. In China, it takes an average of 2.1 years for funds to stay in the invested firm, compared with 4.8 years in Europe and 3.7 years in the US, research by Bain Capital showed.

Winston Zhao, senior counsel with MWE China Law Offices, said in Shanghai yesterday the situation may be due to investors being "not in a long-term investment mood."