Little research has been done on venture capital investments in China, although they have been growing fast in the past decade. This dissertation examines the history of venture capital in China in the 1990s by means of two unique data sets collected by the author. It finds that the Chinese government’s policies have had an important influence on the pattern of venture capital investments. China’s venture capital industry is dominated by international venture capitalists primarily because of the restrictions on fund-raising in China. In addition, discriminatory policies in the early 1990s discouraged venture capital investments in private firms. International venture capitalists became more interested in private firms as China’s market-oriented reform deepened. The author also finds that the availability of channels for initial public offerings channels has had a profound effect on venture capital investments in China. The NASDAQ “technology bubble” in the 1990s encouraged venture capital investments in high-tech and early-stage firms, drove up the valuation of venture capital-backed firms, and reduced the equity stake held by venture capitalists. Total venture capital investments in China decreased quickly as the NASDAQ index went down after 2000.
Table of Contents
1991 to 1993: The First Wave of Venture Capital Investments
1994 to 1997: In Search of New Directions
1998 to 2001: The Second Wave of Venture Capital Investments
Summary and Conclusions