Through foreign direct investments, China has experienced a boom in the expansion of capital investments as well as seeking investors of all types. However, it is not easy to successfully manage venture capital investment in China since the region has strict commercial laws which often make it difficult to venture companies to operate in such an environment. This paper highlights some of the barriers and risks venture capitalist faces in Chinese companies. As well, the paper will outline some of the hurdles faced by venture investees in China, in particular, Shenzhen Capital Group Co.
Lack of the legal environment and supportive institutional framework is one of the barriers venture capital financing in China face. China lacks a legal infrastructure that enhances the efficiency and effectiveness of business transactions through a personal relationship network (Center for Macroeconomic Research of Xiamen University, 2016) . The attitud e of the government towards foreign investments concerning a high tech industry is also ambiguous making it difficult for venture capitalists organize and operate their business entities even after meeting onerous capital requirements.
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Additionally, the ambiguity of defining industries prohibited to foreign investment is another obstacle international venture investee’s face. For instance, in the past two years, there has been confusion over the foreign investment policies in China whereby the government provide contradictory messages in the internet and telecommunication sector regarding foreign investments (Center for Macroeconomic Research of Xiamen University, 2016) . It is therefore essential for foreign investors to be informed in a clear fashion on areas of investment so that the funding can be efficiently channeled to private Chinese companies.
Difficulties in monitoring and overseeing entrepreneurial firms especially in a vast region is another challenge venture capitalists face when investing in China. For instance, recent research studies indicated that nearly half of venture investee in China have a venture director with an office within sixty miles (Center for Macroeconomic Research of Xiamen University, 2016) . The substantial cost requires to break down geographical barriers as well as the size of the region make it difficult for a venture capitalists to manage their investments effectively. Thus, there is the need for rapid infrastructural development and communications channels in China to ease this barrier.
Shenzhen Capital Group Co is one of the leading venture investee companies conducting business in China. The firm was established in 1999 and has managed to invest in funds of international joint ventures such as the Sino-Singapore Fund and Sino-Israel Fund. Just like any other venture company, Shenzhen Capital Group Co also faced some hurdles during its initial years of inception. One of the significant challenges was the regulatory environment (Center for Macroeconomic Research of Xiamen University, 2016) . During its inception, Shenzhen Capital Group Co spent a lot of time and resources to comply with the rules and regulations of the country. Meeting compliance items was costly and a significant hurdle to the company.
Corruption and lack of transparency in China was also another challenge Shenzhen Capital Group Co faced while entering the Chinese market. Lack of transparency in China negatively affected the operations of Shenzhen Capital Group Co in struggling to learn the system and comply with the regulations. This created instability and derailed the development of the business. However, implementation of effective policies in enhancing transparency and accountability in China contributed to the growth of the company.
In conclusion, despite the high rates of venture capitalists activities in China, they are many barriers and risks venture capital financing in China face. However, policymakers in China have been informed about the inefficiencies of the legal system governing venture capital investments in Chinese Market. As a result, China is gradually heading towards enhancing efficiency, friendly and vibrant environment for venture capitalists.
Reference
Center for Macroeconomic Research of Xiamen University. (2016). China's Macroeconomic Outlook: Quarterly Forecast and Analysis Report, February 2016. Singapore: Springer Singapore.
