Foreign venture capital (VC) is expected to become a new growth point for investment in China, a senior official with the newly created Ministry of Commerce said Wednesday.
Li Ge, deputy director of the ministry's Foreign Investment Administration Department, said the central government is detailing VC regulations concerning capital outflow and taxation, to encourage global VC investment in Chinese firms.
Li revealed the changes during an annual global private equity conference in the city.
The two-day conference, which ends today, was organized by New York-based Global Venture Network and has attracted more than 100 VC managers from throughout the world.
China received US$52.7 billion of foreign direct investment last year, overtaking the United States as the world top overseas investment destination.
But most of the investment was in the form of direct investment from foreign businesses, with VC inflow only accounting for a tiny fraction.
Li predicted a big flow of VC into China as the country further refines its legal framework for VC investment.
Under the latest regulations, foreign VC in China has been ensured an access to transferring their profits out of the country through the nation's Foreign Exchange Trade System, though relevant regulations need to be further perfected, Li said.
According to statistics released at the forum, around US$60 billion of new private equity will be raised in the United States in 2003.
But Asian private equity investment firms are only expected to raise US$1 billion, down from US$3 billion in 2002 and US$10 billion in 2001, with the majority of the capital still going to US and European businesses.
The main reason for China missing out is that global VC investors are not familiar with the Asian market, said James Hahn, chairman of Global Venture Network.
"Our annual Shanghai conference acts as a bridge to unite the most active and preeminent US and European investors to Asia, especially China," Hahn said.
(China Daily March 27, 2003)
