VC Investments in China Top $1B in 2004: Premier wants tech zones established to encourage even more growth

Money is following the jobs and excitement that represents China's economy these days according to an annual survey of equity investments in China mainland businesses. Compiled by Chinese venture capital (VC) research and consulting firm Zero2IPO, the fourth annual survey found 60 firms made 253 investments totalling $1.269 billion (US) in China mainland or mainland-related enterprises in 2004.

The rapid growth in the world's fascination with all things Chinese also is evident by the number of deals increasing more than 43 percent over last year. The survey results mark the first time the total has surpassed $1 billion, with total funds increasing by 28 percent over the prior year.

According to Zero2IPO, the Information and Computer (IC) industry received the bulk of the investments, reporting $424 million with a primary focus on IC design. Telecommunication firms captured 12 percent of the total, while 14 percent was invested in firms in the "traditional" industry sector. The Shanghai region received the greatest number of deals and highest investment amount, followed by Beijing.

The Chinese innovation phenomenon is likely to become more geographically concentrated to a certain degree as the nation looks to expand its version of cluster development. According to People's Daily Online last week, Chinese Premier Wen Jiabao voiced his support of national economic and technological development zones, saying the zones should move ahead in a scientific way by focusing more on restructuring, technological innovation, and making better use of the land. Vice Premier Wu Yi also praised the zones' role in developing industrial projects, attracting foreign investment, pushing up export and developing high-tech industries over the last 20 years, the article contends.

The Vice Premier is pushing for the zones to become multi-functional industrial zones through four transformations, according to the article. Her recommendations include changing from developing modern manufacturing to covering international service outsourcing; shifting from a focus on scale economy to quality economy; moving from technology introduction to innovation; and basing the zones on advantages of structure and overall environment instead of relying on policy environment.

The China Venture Capital Annual Report 2004 is expected to be available for purchase through Zero2IPO at: http://www.zero2ipo.com.cn/en/