Private Equity in China: The 'Cautious' Gold Rush



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Code : BSM0018

Year :
2005

Industry : Banking, Insurance and Financial Services

Region : China

Teaching Note:Not Available

Structured Assignment :Not Available

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The Dawn of Private Equity Private equity inChina began in themid-1980swhen the government decided to uplift and develop various technologybased industries. Thiswas the first sign of a transition fromthe central planning systemto amarket-oriented business system in China where decisions on R&D would be taken autonomously by the research institutes and not by the Governing bodies. The earlier dependence on the central government for resources for innovation in the 1970s and early 1980s led to the creation of an environment where therewere no incentives for those involved in the system...

The Changing Investment Environment China emerged as a new "hot favourite" for private equity players in the Asia-pacific region with thirty-eight companies receiving a total of US $549.9 million in the year 2003. China ranked seventh in terms of investments received in 2003 in the region. The semiconductor and electronics industry were favoured in 2003 with a total of US $332.3million investments in these two sectors, whichmade up 17%of the regionís volume. Other industries, which attracted the global private players in to the Asia Pacific region in 2003, were the communications and consumer related industries...

The Happening Investments Success stories, which were earlier hard to find inChina, were becoming easy to locate in themainland and investors were admitting that every investment did pay off in China. Venture capitalists were ready to enter theChinesemarket from different time zones because of successes like 51job.com. Doll Capital management, based in Menlo Park, California, invested $14million company in early 2000 when itwas a start-up. DavidChao, a Doll Capital founding partner stated that this investment firmwas among the firstUS-based venture firms to invest inChinese start-ups. 51job.com, a Shanghai-based human resource services provider in China, went public on the Nasdaq market in the United States on September 30th 2004...

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