New VC funds mostly in yuan

China's venture capital (VC) market had 91 new funds in 2008, a 57 percent increase from 2007, according to a recent report released by EZCapital & HolyZone, a consulting firm.

The total amount raised by new funds in 2008 was around 264 billion yuan ($37.7 billion), up 347 percent on the previous year, according to the report.

There were 58 yuan-denominated funds (63 percent) and 33 dollar-denominated funds (37 percent), mostly due to the government's efforts to promote such funds. Yuan-denominated funds accounted for 43 percent of new venture capital funds in 2007.

China released new statutes and codes to regulate the mainland venture capital market, giving local funds a healthy development environment and made progress on setting up a trading board for start-up companies, the Growth Enterprises Board (GEB), which will further boost yuan-denominated funds.

But most of the yuan-denominated funds were small. Their average value was around 672 million yuan ($96 million), one-ninth the average of the dollar-denominated funds.

The top three yuan-denominated funds were Hony Capital (the investment arm of Legend Holdings), the Overseas Chinese Investment Fund and Tianjin Binhai New Area Venture Capital Guiding Fund.

Hony Capital was raised in September and has a value of 5 billion yuan. Tianjin Binhai New Area Venture Capital Guiding Fund, which is operated by the Tianjin municipal government, was raised in March and is worth 4.7 billion yuan. The Overseas Chinese Investment Fund, raised in April, has a value of 5 billion yuan.

The financial crisis may have helped the number of new dollar-denominated venture capital funds last year as nervous investors sough safer investment in China.

Australia-based CVC Capital Partners Asia-Pacific III L.P (Fund III) raised $4.1 billion to invest in well-running businesses in the Asia-Pacific region last April. Fund III is the region's largest. In August La Salle Investment Management raised $3 billion. CDC Capital Partners raised $2.9 billion in December.

(China Daily 03/09/2009 page4)