Venture capital in China: Past, present, and future

This article reviews the literature on venture capital in China and examines where China’s venture capital industry has been and where it is likely to go in the future. Since the 1980s, venture capital in China has grown steadily alongside the robust national economy. The future is likely to offer even greater opportunities, as entrepreneurs are encouraged and property rights improve. However, there will also be a period of transition as the market continues to mature and as new legal structures and commercial arrangements emerge. Venture capital in China has many interesting differences from that in Western countries. The venture capital industry is shaped by the institutional context and China is no exception to this. This article also examines some specific differences between the system in China and that of the United States. Future prospects for venture capital are also appraised as China continues its transition to a market economy. Asia Pacific J Manage (2007) 24:247–268 DOI 10.1007/s10490-006-9032-1 Appreciation is expressed to Mike Peng (Editor-in-Chief), Katherine Ng of the Hong Kong Venture Capital Association, and Mike Wright and Andy Lockett of the Centre for Management Buy-out Research, University of Nottingham for their helpful comments and discussions. The authors express thanks to Vincent Chang of Citibank, Steven S.Y. Lui of The City University of Hong Kong, and Marc Ahlstrom of Burlington County College for their comments on earlier versions of this manuscript. The work was substantially supported by a grant from the Republic of China National Science Council NSC93-2416-H-110-024, a grant from the RGC Research Grant Direct Allocation Scheme (Project no. 2070212, 2000–2001) of The Chinese University of Hong Kong, the Hong Kong Special Administrative Region. Summer research support was also provided by the Texas Christian University Tandy Center for the second author. D. Ahlstrom (*) Department of Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong, People’s Republic of China e-mail: [email protected] G. D. Bruton M.J. Neeley School of Business, Texas Christian University, TCU Box 298530, Fort Worth, TX 76129, USA e-mail: [email protected] K. S. Yeh Department of Business Management, National Sun Yat-Sen University, Kaohsiung, Taiwan, Republic of China e-mail: [email protected]