If you had to pick a capital of China’s local-currency private equity and initial public offering booms, it would likely be Shenzhen.
- Shenzhen, a port city in China’s South near Hong Kong, is fast becoming a frequent stopping point for venture investors.
Shanghai and Beijing are frequent stopping points for investors, but Shenzhen could become a part of that standard itinerary, given the investing ecosystem that has built up around the city and the strong returns earned by general partners based there.
Shenzhen, a port city in China’s South near Hong Kong, was one of the first to be designated as a special economic zone when the country began liberalizing its economy. A manufacturing boom followed, creating wealth that has made the city attractive for younger money managers and seasoned veterans looking to break into private equity and venture capital investing.
On their doorstep those investors have the Shenzhen Stock Exchange, the site of both the country’s SME exchange for small and medium-sized enterprises, and the ChiNext, a technology- and growth-focused exchange modeled after the Nasdaq.
“Shenzhen has been an entrepreneurial hub in China for 30 years and has been the fastest growing city in the world for about 30 years,” said Erik Lassila, a partner with private equity firm Share Capital Partners. “Shenzhen is a petri dish for founding new companies.”
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China’s economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy.
Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work.
China has emphasized raising personal income and consumption and introducing new management systems to help increase productivity.
Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.
Its mineral resources are probably among the richest in the world but are only partially developed.
China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.
Over the years, large subsidies were built into the price structure, and these subsidies grew substantially in the late 1970s and 1980s.
Both forums will start on Tuesday.
But “this is just a beginning.
It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.
In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.
Despite initial gains in farmers’ incomes in the early 1980s, taxes and fees have increasingly made farming an unprofitable occupation, and because the state owns all land farmers have at times been easily evicted when croplands are sought by developers.
In terms of cash crops, China ranks first in cotton and tobacco and is an important producer of oilseeds, silk, tea, ramie, jute, hemp, sugarcane, and sugar beets.
Livestock raising on a large scale is confined to the border regions and provinces in the north and west; it is mainly of the nomadic pastoral type.
Coal is the most abundant mineral (China ranks first in coal production); high-quality, easily mined coal is found throughout the country, but especially in the north and northeast.
China’s leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.
In addition, implementation of some reforms was stalled by fears of social dislocation and by political opposition, but by 2007 economic changes had become so great that the Communist party added legal protection for private property rights (while preserving state ownership of all land) and passed a labor law designed to improve the protection of workers’ rights (the law was passed amid a series of police raids that freed workers engaged in forced labor).
Taiyuan and Xi’an are important centers in the less populated interior, and Lanzhou is the key communications junction of the vast northwest.
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China’s Shenzhen Prospers as Local Investment Hub
