In the first half of 2020, China’s 1,069 venture capital (VC) and private equity (PE) funds raised 431.8 billion yuan ($64.3 billion). The figure is down 29.5% from a year ago and part of an extended slide which started in 2017, resulting in a 32.8% drop in the number of deals, according to data from Zero2IPO Research.
VC and PE funds are major private investors that raise vast pools of capital from qualified institutional investors, known as limited partners, to invest in privately owned companies for long-term returns. VC funds target start-ups, and PE focuses more on mature companies.
Analysts, speaking to Caixin, now think Chinese venture capitalists and private equity investment funds are at a crossroads as the 10 trillion yuan market faces a slowdown worsened by the Covid-19 pandemic. They say the sector needs more effective regulatory oversight and self-discipline to stop and even reverse the three-year decline.
Supervision of China’s private investment market has long been fragmented, with regulatory duties divided between the National Development and Reform Commission (NDRC) and the China Securities Regulatory Commission (CSRC). It wasn’t until 2013 that a central government document clarified the CSRC’s leading role in supervising VC and PE firms. However, in practice the regulatory boundary has remained blurry, allowing misconduct to thrive in regulatory and legal gaps, analysts said.
The CSRC has been exploring ways to better manage the industry but still has many unresolved issues, a CSRC official said.
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