Market Access Report: Venture Capital

Jones, Day, Reavis & Pogue

As the old adage goes, "the more things change, the more they stay the same". This is indeed true for venture capitalists whose on-the-ground investment activities in China have recently been shored up with new regulations and who, along with the rest of us, are witnessing the ongoing regulatory reforms and roll-out of WTO-related sector liberalizations in China. But, irrespective of China's entry into WTO and the resulting changes to the business environment, venture capitalists also continue to face many of the same issues that they have been facing for years in China. These include, for example, the limitations under PRC law on structuring options, exit strategies, etc.

With this in mind, venture capitalists and fund seekers alike should consider the opportunities that are emerging as a result of WTO within the context of the basic PRC regulatory environment for plain vanilla foreign direct investments, much of which will not be dramatically changed as a result of China's WTO accession. Thus, at least in the near future, venture capital (VC) financing in China will largely be business as usual, albeit with the benefit of an increasing pool of potential target companies and, hopefully, an expanding body of legislation to support their investment activities.