China has become a major attraction for international private equity investors, said industrial leaders at the 2020 Global PE Forum in Beijing during the China International Fair for Trade in Services.
The growth of the Chinese private capital industry over the last two decades has been remarkable, with total capital invested by PE and VC firms in China reaching $290 billion over the last five years through 2019, said Cate Ambrose, CEO of Emerging Markets Private Equity Association (EMPEA).
China represents just over half of total deal value, outside of the US and Western Europe, over that same period, and that growth has been driven overwhelmingly by investment in technology enabled businesses and from venture capital, Ambrose said.
EMPEA aims to promote a global ecosystem where investors compete and collaborate to grow successful companies and projects, both within their domestic markets, and across borders and among the markets that the association represents, which China dominates, Ambrose said.
Jim Breyer, co-chairman at IDG Capital and founder and CEO of Breyer Capital, echoed Ambrose, saying he saw tremendous long-term opportunities within China in areas such as artificial intelligence, opportunities around the roll-out of 5G, applications that are built on 5G, environmental sustainability, and next-generation manufacturing opportunities.
Breyer, speaking in Silicon Valley in the United States, said Breyer Capital and the team, focusing on early stage venture capital technology-based entrepreneurs for 15 years in China, have found long-term opportunities as technology, robotics, software and some of the real-time software applications are being developed in all parts of China and the US.
Long-term cooperation between China and the US in critical global areas can make a real, huge difference, said Breyer, emphasizing great potential for long-term cooperation between the US entrepreneurial community, medical schools, universities as well as the great universities of China, such as Tsinghua, Peking, Shanghai Jiaotong and others, especially in the post-epidemic era.
Human capital is the key factor for success for investments and Breyer enjoyed the interaction with many of the best leaders, best entrepreneurs, and best academics, in China and the US, and he emphasized the importance of these outstanding people learning from each other to make a difference.
Breyer said whether one is investing in China or the US, understanding ecosystems at a detailed level is the key and it will allow Breyer Capital and its partners at IDG to continue generate outstanding returns over a long period of time.
China not only attracts US investors” attention but also European investors in diversified areas. Unlike Europe, VC constitutes a huge part of PE in China, about 40 percent of PE investments can be deemed VC/growth…compared to only some 14 percent VC in European PE, said Claus Mansfeldt, president of Luxembourg Private Equity and Venture Capital Association.
Internet, ecommerce, electronic payments are all key components of the rapid growth and venture space in China, according to Mansfeldt.
China has become an important growth driver in world services trade in the past years and the country has been the world’s second-largest trader in services for six consecutive years, with its trade in services reaching 5.42 trillion yuan ($793 billion) in 2019, the Ministry of Commerce said.
Post-pandemic, this trend will likely impart more growth impetus to both domestic and global firms and it will provide greater opportunities for international investors eyeing Chinese market.