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Special> China International Fair For Investment & Trade> Beijing Review Exclusive> Investment
UPDATED: August 3, 2009 NO. 31 AUGUST 6, 2009
Next Investment Spree
Venture capitalists and private investors target China's clean technology, medical and 3G services markets

David Hong, a partner of China Team of KTB Investments, shared the optimistic outlook on the crisis and offered his reasons at the panel. "The crisis tests the true character of a company and will narrow down the choices for investors to those with competitive and sustainable business models and those representing industries and services of the future," he said.

"Also, because of the economic downturn and adjustments in the sluggish capital market, investors are able to give their targets a more reasonable valuation," he said. "Overseas capital markets have shown signs of picking up and China's GEM is around the corner, which will reopen the exit channel via IPOs for us."

"Moreover, I don't think there would be a substantial liquidity contraction before a substantial recovery of China's real economy, especially before enterprises regain its profitability," he said.

Yu Songling, Chairman of Oriental Cambridge Education Group, said the financial crisis was more of a blessing than a curse for the education industry.

Any education corporation has to take into consideration three principles: the principle of education which decides whether you can carve a brand for yourself, the principle of population which decides if you can enroll enough students and the principle of market.

Housing and education remain two major spending items for average Chinese families. In an economic downturn, when home buyers become more sensitive to housing prices, real estate developers are inviting renowned education corporations to open quality kindergartens in their properties to boost sales, Yu said. It works because a high birth rate will make it increasingly difficult for new parents to send their children to prestigious kindergartens in large cities such as Beijing and Shanghai, he said.

The financial crisis played in their favor in other aspects, as senior professionals are available at the labor market due to large-scale layoffs, teachers tone down their salary expectations, and negotiations with large companies for specific services such as Enterprise Resource Planning (ERP) installation are easier and cheaper, Yu said.

Because of its stability, education is a favored investment target during the downturn, he said.

Clean-tech campaign

The clean technology endeavor, which covers the environmental protection industry and new energies, is expected to lead the global economy out of the economic recession, said Ye Dong, founder and managing partner of Tsing Capital at the panel discussion on clean technology revolution.

Most investments in this area went to water and air pollution control, and waste management during 2000-05. Since the end of 2005, however, investors began to invest more in energy conservation, solar energy and wind power companies.

The Chinese Government has played a vital role in pushing the research and development of clean technology through its anticipated spending of more than 3 trillion yuan ($439 billion) in the renewable energy sector by 2020 to cover a smart grid development program, power battery development, environmental protection and water market reform.

"Clean technology is a systematic engineering program compared with other industries," said Roman Shaw, founder and partner of DT Capital Partners. "The industry has to rely on the guidance and supports of the government for development because it has not yet formed its competitive advantages in China."

"Whether an investor can seize the opportunities in the industry depends on his understanding of specific policies and their trend," he said.

"Only those truly controlling core technologies and capable of slashing costs will survive the competition, because many a company in China's clean technology industry has imported their equipment," he cautioned.

While acknowledging that a lack of core technologies will impede the industry from flourishing in China, Wang Shiwen, Chief Editor of Enviroinvest, a website on fundraising and investment in environmental industry, said China's huge market potential, cost-competitive manufacturing sector, as well as the economy's inner urge for industrial structure upgrading, and pressures from the international community to adopt a more sustainable, eco-friendly economic development model all pose opportunities for the industry to boom.

Medical reform

It has been costly and inconvenient for the average Chinese to fall ill, no matter whether he or she is an urban resident or a farmer. On January 21, the government began to address problems such as expensive medical bills and limited healthcare resources for its 1.3-billion population through a new medical reform plan.

The plan commits 850 billion yuan ($124 billion) by 2011 to have a catalogue of necessary drugs produced and distributed under government control and supervision. The plan also seeks to improve healthcare services at grassroots medical institutions, provide equal and universal public health services in urban and rural areas, and launch a pilot reform of public hospitals.

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