China Investment Environment

Transcription

1 Potential for great match between Chinese investments and Finnish Innovation exists and will likely to remain or even increase with many new investment models emerging in the coming decade but we in Finland have not yet found a good way to succeed in that. China Investment Environment Start-up/Growth Company Finance Market in China Lion Partners Limited for Team Finland Future Watch January 2015

2 China has become a net OFDI investor very rapidly in the last couple of years after having been on the receiving side for a long time. Unfortunately Finland is going against this trend still being a net investor to China. Chinese cumulative investments to Finland are around 100 million euros vs. over 10 billion euros of investments from Finland to China. Chinese investors regard Finland very highly as a source for innovation and a safe place to invest so this does not explain the imbalance. It is partially explained by big investments by large Finnish industrial companies into China, but China could easily in theory do the same into Finland. President Xi Jinping announced late 2014 that China would invest abroad 1,25 trillion USD in the next 10 years. Also, in order to strengthen the domestic innovation ecosystem the Chinese Government has just announced that they will set up a state venture capital fund worth 6,5 billion USD to invest in the country s start-ups in further effort to follow the goal of changing the mode in China from made in China to innovated in China.

3 The OFDI from China was started by SOEs (State Owned Enterprises) and followed by POEs (Privately Owned Enterprises) and wealthy individuals. Venture Capital investments from China as well as FOF type investments into foreign VCs are in pilot stage but likely to grow rapidly once enough successful cases take place and sound working practices with international counterparts are found. One should note that the Chinese Venture Capital industry measured by total investments made is slightly smaller than the EU s and has been around 5-10% of US Venture Capital industry s size in the recent years as a lot of Chinese investing capital is held by SOEs and POEs that are also actively making investments both domestically and internationally. Chinese SOE s and POE s main investment model has been M&A taking control of the investment targets, so at least partially this is likely to continue to VC type investments where the Chinese counterpart is likely to take control at least in the efforts into China. This has been seen in even very high profile cases such as Amazon and LinkedIn entering China with the support of a local VC (note: these companies hardly need Chinese investment, but they need the access to market and after having failed to do so on their own they have turned to local investors for that).

4 Finnish VCs are slowly becoming active in China trying to establish contacts to the local ecosystem, but as Chinese Venture Capitalists as well as Fund of Funds are still relatively inexperienced in international or cross-border deals as are the Finnish counterparts in dealings with the Chinese the mode is still very experimental and learning by doing. In the past year Chinese investors participated in M&A in Finland and also minority investments were made both by Chinese Venture Capitalists as well as corporate investors. So Finland has good reference cases in place, now the challenge is to make those successful and encourage even more activity. Despite attempts to coordinate and get various actors to cooperate under the Team Finland strategy reality is still that there is competition even among fully government-funded agencies about work. In the last couple of years a number of public and private incubators and accelerators has emerged in China, at least in all the main cities with heavy startup activity such as Beijing, Shanghai, Shenzhen and Hong Kong, targeting foreign teams and companies looking to enter the Chinese market. So far we have not found a single Finnish team or company in these!

5 Interested to know more? Read whole China Investment Environment report in Slideshare or our webpage Contact us Future Watch contact in China & East-Asia Sari Arho Havrén (sari.arhohavren at tekes.fi) Future Watch Team in Helsinki Heli Karjalainen (heli.karjalainen at tekes.fi) Laura Nurmi (laura.nurmi at tekes.fi)