Venture no further

China's venture capital (VC) and private equity (PE) firms have seen a sharp drop in activity this year, following a period of rapid expansion. An industry reshuffle is now expected, with many firms expected to shut down or seek opportunities in other sectors.

In the first three quarters of 2012, domestic PE firms raised a total of $7.9 billion for investment, much less than the $35.7 billion raised in the same period of last year, and the $25.6 billion in the first nine months of 2010, according to a study e-mailed to the Global Times by consultancy firm Zero2ipo.

Domestic VC funds raised a total of $6.04 billion in the first three quarters of 2012, less than the $21.3 billion and $9.2 billion raised in the same period of 2011 and 2010, respectively, according to the study.

A number of small-sized PE and VC firms, which were set up only two to three years ago, have already closed or turned to other business areas, Li Weidong, research director at financial consultancy China Venture, told the Global Times.

"An industry reshuffle, which will involve consolidation and a dramatic decline in the number of small- and middle-sized PE firms, is coming," Li said.

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