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December 10, 2009

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Global crisis erodes PE, VC investments

PRIVATE equity and venture capital investments in China plunged in the first 11 months of this year due to the global crisis but signs of recovery have emerged in recent months, an industry report said yesterday.

PE firms invested US$8.43 billion in 102 businesses through November, compared with US$9.6 billion in 155 businesses last year, the Zero2IPO Research Center said in a report.

Meanwhile, VC firms invested in 425 businesses, a drop from 607 businesses last year, the report said. The firms invested US$2.39 billion in 381 of them, a tumble of 43.2 percent, the report said.

But investments have rebounded since the third quarter with the recovering Chinese economy, with local PE and VC firms grabbing a greater share when their foreign counterparts retreated amid the global credit crunch, said Gavin Ni, the center's CEO, at a forum in Shanghai yesterday.

Yuan-denominated investments accounted for 45.5 percent of the VC funds to total US$1.09 billion, up 12.4 percentage points from last year's 33.1 percent, according to the report.

In the first 11 months this year, 133 Chinese companies launched initial public offerings globally to raise US$40.7 billion, and 58 of them backed by VC and PE firms raised US$10.4 billion.

A total of 71 companies were listed on the Chinese mainland and they raised US$20.39 billion after the Chinese government resumed IPOs in June and launched a Nasdaq-style board, ChiNext, in October to help start-up firms to raise money.

"The ChiNext is expected to be a major channel for VC and PE firms as they can get good returns backed by the high price-earnings ratio of the firms listed on it," the report said.


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