The Benefit of Cross-Border Investments in the Chinese Emerging Venture Capital and Private Equity Market

in Finance, FORTH

par Bertoni, Fabio (19..-....) ; Groh, Alexander (19..-....)

2022 | En anglais

This paper analyzes the impact of cross-border investments on the success likelihood of venture capital (VC) and private equity (PE) transactions, focusing on the Chinese emerging private capital market. Suchard (2017) comprehensively describes the development of the Chinese private capital market, which has its origin, similar to the U.S., in the VC segment. She emphasizes that the first VC firms in China were established in the late 1980s, several decades after those in the U.S. In their development towards state-capitalism, the Chinese government encouraged, and sometimes sponsored, funds to invest in state-owned enterprises in order to bring them up to a world-class standard. The State Science and Technology Commission and the Ministry of Finance formed the China New Technology Venture Investment Corporation in 1986. It was designed as a government agency supporting technology venture policy objectives at a national level. Its focus was therefore not profit-oriented. The corporation went bankrupt in 1997 partly because of a lack of investment opportunities. The first notable wave of start-ups began when R&D centers and universities began to provide technology and seed capital for start-ups as spin-outs or spin-offs. For example, in the early 1990s, 85% of the start-up capital of the new technology companies founded in Beijing was provided by the research centers or universities they emerged from. A second wave of technology investments was triggered by Chinese banks, which were allowed to provide loans via the so-called Torch Program…

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