VC Investment in China

[via Paul Denlinger] Mercury News writes:

For years, if not decades, entrepreneurs have dreamed of making it in China, salivating at the prospect of more than a billion people and an economy growing at 9 percent a year. But for the most part, those dreams have so far remained just that — dreams, with few and limited cases of success.

Now, new developments are drawing the eyes of VCs, and they see money. A raft of recent successful initial public offerings of Chinese companies show that foreign investors finally have a way to recoup profits from investments there. The companies, which are listed on Nasdaq or Hong Kong stock exchanges, are producing gains that some say could make U.S. ventures pale in comparison.

China’s income per capita has risen sharply over the past decade, giving consumers real purchasing power. Half the population in several major cities has phones, compared with only 1 percent in 1990. A large tide of U.S.-educated Chinese entrepreneurs and engineers have returned home to China, taking back valuable management experience.

Finally, the massive growth of foreign direct investment in China from corporations is helping spur China’s economy. About $1 billion in capital is invested in China per week, according to McKinsey & Co. China draws more in a year than India does in a decade, says Ram Shriram, an angel investor and early backer of search engine Google. He has invested mainly in India, but China is grabbing his attention. It “makes the industrial revolution look lame in contrast,” he says.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.