Bright spots seen in bearish investment market

China's investment market is witnessing its "coldest winter" with total funds raised falling by 10 percent on a yearly basis to 1.08 trillion yuan ($153 billion) during the first 11 months of this year, with some industry experts opining that the drought is not as bad as predicted.

According to a report from venture capital and private equity research firm Zero2IPO, net investment in the domestic market during the first 11 months was 730 billion yuan, down 29.5 percent on a yearly basis.

The information technology, internet and medical care sectors were the major beneficiaries with investments of 135.7 billion yuan, 105.5 billion yuan and 103.2 billion yuan, the report said.

"Though the funds raised and the investment amount have fallen, the decline is lesser than expected," said Ni Zhengdong, chairman of Zero2IPO, at the 19th China Venture Capital & Private Equity Annual Forum on Tuesday.

Ni said it has been a good year for VC and PE investors to cash out through initial public offerings and said these investors have supported two-thirds of the total 287 IPOs both at home and abroad, up 60.5 percent year-on-year.

Also, State-owned entities invested in 13.5 percent of the total 29,000 private equity funds. During the first 11 months this year, State-owned funds have invested or subscribed to 72.4 percent of the total funds raised, Ni said.

"China's equity market is experiencing a big 'physical examination' this year but the sector needs such adjustments for the survival of the fittest," he said.

The report also pointed out that investment was stronger in machinery manufacturing, IT and medical care industries, up by 64.1 percent, 34 percent and 10.1 percent respectively.

"The benefits brought by mobile internet have gone and the growth rate of the digital economy is also slowing down in the country. The next investment opportunity will come from back-end innovations driven by technologies," said Kaifu Lee, chairman and CEO of Sinovation Ventures.

Back-end industries, according to Lee, refer to mostly traditional industries that need tech for transformation, such as enterprise services, factory supply chains, medical care and logistics.

Ying Wenlu, founding partner of investment firm Addorcapital, said technology will be the buzzword for the next decade of investment in China.

"Industrial upgrade and supply chain restructuring can be potential gold mines, especially for fundamental materials and core industrial components," he said.

He said that next year would be challenging for both startups and investors due to trade friction, deepening of reforms, industrial upgrades and credit issues of industries entering a key period.

To tackle the challenges, Ni Zewang, chairman of Shenzhen Capital Group, strongly recommended that more investment firms should team up than compete for investments so as to improve capital efficiency.

"Next year, we will beef up our presence in foreign markets and scout for new growth engines," he said.