As far as international venture capital is concerned, three sectors that deserve big injections of cash this year are energy, media and the Internet.

That's according to the U.S. National Venture Capital Association survey of more than 200 venture capital institutions.

But what will attract venture capital in China specifically in 2007?

Last year, hot sectors included education, chain hotels, banking, solar energy and Web 2.0.

But this year, Standard Chartered Private Equity, for one, favors China's real estate industry. At the beginning of January, Standard Chartered Direct Investment Co., a subsidiary of Standard Chartered Group, invested $35 million in Sino-Ocean Real Estate. This is the third mainland realty enterprise in which Standard Chartered has invested within the last year, following Shimao and Greentown. Chen Fan, Greater China Regional President of Standard Chartered Direct Investment, said enthusiastically, "Our investment in Shimao has tripled and net profit has increased by 200 percent." Up to now, Standard Chartered has invested a substantial sum of $135 million in Chinese mainland realty enterprises.

A further look into the industry suggests four areas of particular interest for VC in China: software, energy, social networking sites, and other interactive business.

Policies support software industry

The Chinese software industry has always been favored by investment institutions. From its two fund raising events in 2005 and 2006, software outsourcing enterprise Worksoft Creative Software Technology Ltd. raised close to $40 million. Like many others, Neusoft Group also attracted $40 million in venture capital investment in 2006. Encouraged by the successful listing of Kingdee, UFIDA, SinoCom and eFuture, both domestically and abroad, local and foreign capital funds and related enterprises are very anxious to create more software legends.

"China produces the most IT products in the world," said Sun Wenhai, Executive Director of global venture capital investment fund ePlanet Ventures. "And among them, the demand for chips from China is the highest. As a result, China's chip industry holds huge potential. Whoever can manufacture the cheapest and best chips will have the biggest and best market opportunities."

Compared with established software enterprises overseas, Chinese software enterprises suffer at the hands of product duplication, insufficient capital, low technical levels, and a lack of policy support, resulting in restricted development. Recently, however, there has been some good news. China's Ministry of Information Industry is issuing new policies to encourage the development of the software industry, emphasizing priority treatment for listed software and chip manufacturing enterprises to promote technological innovation.