China is considering a tax incentive policy to further encourage the booming venture capital (VC) industry, a government official has said as the country became the second largest VC recipient in Asia.

 

The National Development and Reform Commission (NDRC) and six other ministries are jointly working on the new preferential policy. "It will come out in less than two weeks", said NDRC official Liu Jianjun.

 

It echoes the national target set early this year of developing an innovation-based economy, said the NDRC official.

 

In the first eleven months of the year, venture capital of US$1.7 billion flooded into China, 57.5 percent more than last year, said the report released by Zero2ipo, a VC research institute.

 

Information technology remains the most appealing sector, attracting 62 percent of the total.

 

VC investment in the service sector rose to 9.6 percent, and the bio-technology and medical industries also posted rapid growth, surging from 2.3 to 7.1 percent.

 

More lucrative early stage ventures attracted more investment than those at the expansion stage, the report said.

 

However, a lack of legal protection and the absence of preferential tax policies saw some venture capital firms exit the business, preferring to focus on the real estate and capital markets.

 

An industry report released by NDRC said two thirds of the VC companies have invested money in the real estate and securities markets.

 

(Xinhua News Agency December 8, 2006)