Business / Markets

PE, VC firms cautious in China ventures

By Cai Xiao (China Daily) Updated: 2014-03-18 07:35

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Global limited partners are cautious about private equity and venture capital investment in China this year but they believe exit channels have become increasingly smooth, according to a report by ChinaVenture Group.

The study was based on responses from 90 limited partners with businesses in China and abroad, of which 24.4 percent were foreign. Investors in PE and VC funds are known as limited partners.

According to the report, 48 percent of the limited partners surveyed believe there is some risk in the Chinese PE and VC market and they are cautious about investments in the country. Nine percent of them said opportunities in China are limited. Another 24 percent of respondents had a positive outlook for the market this year.

Liu Yan, a partner at PricewaterhouseCoopers China, said a large number of domestic private companies took part in Chinese PE and VC investment as limited partners, partly encouraged by the good investment return of foreign LPs in earlier years in China.

"But as the investment cost is higher and the market conditions are worse, their investment return is expected to be small, so they are hesitating about continuing their investment in 2014," said Liu.

About 46 percent of the respondents said they are confident about an exit from their positions in China because there are diverse approaches to it. As many as 27 percent said they will try their best to exit soon.