Venture capital investment on the Chinese mainland registered continued growth in 2006, with significant activity in healthcare, retail companies and clean technologies, industry reports show.

According to the China Quarterly Venture Capital Report released last month by Dow Jones VentureOne and Ernst & Young, venture capital investment in mainland-headquartered companies reached the highest point in three years, with 214 deals and $1.89 billion invested last year, a 37 percent growth in the number of transactions and a 55 percent jump in capital investment over 2005.

"In 2006, venture capital investment in China was characterized by development in the environment and diversification in the industries attracting investors," says Bob Partridge, China leader of Ernst & Young's Venture Capital Advisory Group.

"While investment was up in the fourth quarter of 2006 compared to the fourth quarter of 2005, we saw a slowdown in the fourth quarter compared to the third quarter, which might be due to the introduction of new mergers and acquisitions rules in that took effect in September 2006, or part of a similar seasonal trend in developed markets," he says.

The fourth quarter showed gains over the same period a year ago, with some 50 deals and $417.5 million invested, increases of 11 percent and 3 percent, respectively. It was the second-slowest quarter of the year, similar to activity in the United States and Europe, the report says.

VentureOne is the publisher of the VentureSource database and compiles investment figures based on the findings of its proprietary Chinese research. The data was collected by surveying professional venture capital firms using in-depth interviews with company CEOs and chief financial officers, and from secondary sources.

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