China will have its own Silicon Valley as it begins to catch up with developed economies in talent, capital and innovation.
“There is still some distance but it will eventually get there,” said Raymond Yang, co-founder and managing partner of Westsummit Capital, which invests 70 percent of its funds in Silicon Valley projects.
Yang said Silicon Valley is an ecosystem of talent, capital and innovation. “We seldom see a second Silicon Valley [in other advanced economies].”
China does not lack capital and it has high-caliber entrepreneurs, he told a forum on Tuesday.
Kathy Xu, founder and managing partner of Capital Today Group, which mainly invests in the mainland’s consumer internet sector, said China used to copy other countries in terms of innovation.
Now, it is ready to lead as post-80s investment in technology, such as the internet and mobile communications, begin to pay off.
She said China has a “golden 20 years” ahead.
“We believe that the Chinese consumer market will be bigger than that in the United States.”
Last year, China had 618 million internet users, up from 298 million in 2008, according to the China Internet Information Center.
That compares with 300 million internet users in North America.
“Beijing started off naturally… with the success of Sina Corp. (SINA.US) and Baidu, Inc. (BIDU.US),” said Foo Jixun, managing partner of GGV Capital, which mainly invests in cross-border deals.
These companies will continue to create opportunities that will attract more talent, he said.
“We saw a similar effect in Hangzhou because of Alibaba Group (BABA.US). It is also happening in Guangzhou and Shenzhen”.
Consumer and technology plays will continue to be the favorite targets of investors, although there are signs of an emerging bubble.
Yang said the investment landscape is in a “unique stage of industry transformation” wherein high valuations are causing investors to exit the market.
Certain exit strategies may be creating bubbles, he said.
“It is a challenge to pick the right company because only 10 percent or less will become an Alibaba or a Xiaomi. The rest are merely bubbles.”
Feng Bo, founder and managing partner of Ceyuan Ventures, said expensive deals are unavoidable as the technology industry continues to boom.
With more market participants competing for such deals, prices will go up, he said.
Meanwhile, a recent regulatory loosening will help boost cross-border deals.
Under the new regulations, acquisitions valued at less than US$1 billion no longer require a full review by the National Development and Reform Commission.
The previous threshold was US$100 million which resulted in a lengthy approval process and delays.
Earlier, Hony Capital, a private equity firm controlled by China’s Legend Holdings, entered into a deal to acquire Britain’s Pizza Express chain for 900 million pounds (US$1.54 billion).
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