Investment Firms Seeing Growth Opportunities in China

A compass decorated in the Chinese flag points to the word "invest."

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As China’s middle class continues to grow, so does the number of companies serving that sector.

Travel companies, real estate websites, online coupon sites, and other services targeted toward the growing economic strength of Chinese citizens, are experiencing great growth. According to Bain & Company, 2015 was a record-setting year for private equity in China.

Growth investment firm General Atlantic is optimistic about the continuing development of the Chinese economy and has appointed Eric Zhang as Head of China at General Atlantic in order to build on current relationships with Chinese companies and open up new ones.

“We are excited to build upon our 16 years of experience partnering with leading entrepreneurs and growth companies in China,” says William E. Ford, Chief Executive Officer of General Atlantic. “Eric’s impressive track record in Asia, deep local expertise, and proven ability to invest in and partner with outstanding companies make him an ideal leader for our local team and long-term efforts in China.”

Bain does point out that although last year was a record year for private equity growth in China, an upcoming slowdown is plausible due to factors including changes in macro-economic conditions and increased competition for deals. But still, many private equity executives see China as the most attractive market in the region.

Despite a volatile economy, middle class wealth has jumped more than sevenfold from 2000 to 2015. Consumer industries such as travel, dining, fashion, and recreation “will be the driving force of consumption in the next decade,” said Michelle Leung, founder and CEO of Xingtai Capital Management, when she spoke at Credit Suisse’s 2016 Asian Investment Conference.

Silicon Valley-based venture capital firm GGV Capital is famous for its early entry into China and for investing in Alibaba before anyone even knew the company’s name. GGV says it will continue to bet on internet- and mobile-technology-driven businesses in China despite some of the concerns about a potential slowdown. In fact, 70 percent of the company’s investments are in China.

Hans Tung, a managing partner at GGV Capital, says he’s still optimistic about China. “We believe the focus of the next 10 years will be the mobile internet sector in China,” he says. “A boom in this area will come soon. If we fail to grab opportunities in the next three to five years, there will be fewer breaks after other players flood the market.”

Ford agrees. “We are seeing incredible innovation from China in the mobile internet market, with a number of new business models and products that set the tempo for the rest of the world,” he says.

General Atlantic has been investing in China since 2000, and it is currently focusing its investments in finance and consumer-oriented businesses. Its current China portfolio includes OceanLink, a private equity firm investing in travel industry; real estate portal Fang.com; Meituan.com, the Chinese version of Groupon; restaurant chain Xiabu Xiabu; tea and accessory retailer Tenfu; and hypermarket corporation Sun Art Retail Group. The company is also looking for promising FinTech startups in Beijing, Hong Kong, and other locations in Asia.

GGV made its first China investment in 2003, when it invested $8 million in e-commerce company Alibaba. Since then, it has focused its investments primarily in the country’s technology, mobile, and social markets.

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