Venture capital investment slows in China

SHANGHAI -- Venture capital investment in Chinese mainland companies declined significantly in the first six months, the latest sign that the world's second-largest economy is slowing.

According to Dow Jones VentureSource, which tracks venture-backed companies, the value of venture capital investments in Chinese companies was $1.9 billion in the six months to June, down 43 percent from the same period last year.

The number of deals declined 38 percent to 103. Each deal represents a single case of investment by a professional venture capital firm, corporation, private equity firm or individual.

Commenting on the decline, Guido Schenk, APAC and EMEA sales director for Dow Jones VentureSource, said venture capital firms are being more selective in considering their China investments, particularly given the uncertain macroeconomic landscape and challenging exit environment.

"Until IPO and M&A activity in China pick up, we are unlikely to see a jump in venture capital investment," he said.

In the six months ending June, venture capital exits in China by IPO declined 42 percent to 32 cases. Venture capital firms exited only three China investments by merges and acquisition, far less than the 208 exits by M&A or buyout in the United States and the 68 exits by M&A and buyout in Europe during the same period.

The overall investment decline in China was sharper than that seen in other major investment destinations worldwide.

During the same period, venture capital investment in the United States totaled $15.3 billion for 1,595 deals, a decline of 7 percent in capital and 5 percent in the number of deals from the same period in 2011.

In Europe, during the first six months, venture capital investment totaled 2.2 billion euro ($2.69 billion) for 550 deals, a 7 percent decline in capital and 10 percent decline in deals from same period last year.