Foreign Private Equity Investment in China

February 28, 2005 | BY

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By Neil [email protected] investment in China by private equity and venture capital funds rose significantly in 2004 and there are…

By Neil Torpey
[email protected]


Foreign investment in China by private equity and venture capital funds rose significantly in 2004 and there are positive signs that additional investments will be made by these investors in 2005 and beyond.

Since an important path to liquidity for private equity investors is through initial public offerings (IPOs), the receptiveness of the US public equity markets to IPOs by China-based companies has been encouraging. A review of IPOs by China-based private-equity-backed companies on Nasdaq or the New York Stock Exchange completed in the last 12 months reveals some interesting trends in the types of companies that are attracting private equity investments.

Exiting through US Equity Markets

First of all, in comparison to 2003 and prior years, the last 12 months have been a good time for exits by private equity investors through the US public markets. By 2003, only a handful of private-equity-backed China-based companies went public in the US. By contrast, in the last 12 months alone, there have been at least 10 initial public offerings by private equity-backed China-based companies on Nasdaq or the New York Stock Exchange. These include Linktone and SMIC in March 2004; Shanda in May 2004; KongZhong in July 2004; and a slew of listings in the last four months of 2004 including 51job, eLong, China Finance Online, Ninetowns and The9. This was finished off by the Hurray! IPO in February 2005.

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