Investing in a tomorrow full of possibilities

China's manufacturing is going through a new phase in which technology will play a crucial role.

As the country's factories retool with more sophisticated hardware, venture capital companies such as ASB Ventures (China) Holdings Ltd are moving in.

Xiong Gang, chairman of ASB Ventures (China), has put together more than 50 deals with half of them in the "hardware" manufacturing sector as investment opportunities grow.

This flurry of activity is part of the "Made in China 2025" plan that was unveiled by the State Council in May. The strategic aim is for the country's manufacturing industry to produce value-added products with the help of cutting-edge technology.

"Technology is the most important criteria for hardware investment, followed by a management team and a business model," Xiong said. "The real basis of hardware is technology, and we pay attention to that when evaluating a deal."

Key areas revolve around software design, clean energy technology and medical equipment. Back in 2008, ASB Ventures (China) invested 6 million yuan ($938,400) in Jiangxi Selon Industrial Stock Co Ltd, a chemical production enterprise. In March this year, the company went public.

"We invested in the group because we were familiar with the sector, and Selon qualified as far as technology and its core management team," Xiong said.

Naturally, one of the biggest problems facing traditional chemical companies is pollution. Cutting down on harmful green house gases has become a priority for the government. With the help of Xiong's team, Selon decided to bring in cleaner technology.

"But that is not the only value-added service. Investors also need help after the initial funding with effective intervention," Xiong said.

One way of doing this is to balance the interests of the shareholders with the management team to make sure manufacturers and companies are firing on all cylinders. To illustrate that, Xiong said Selon felt it was necessary to replace the company's chairman before it was listed, a decision that ASBV was heavily involved in.

Working relationships at the top of the management structure can be just as important as the technology for companies looking to grow, and expand domestically and overseas. Xiong recalled the problems that a healthcare company was facing when ASBV stepped in last year.

Friction between the founders of the company had started to develop and this created a major headache for ASBV. "Although we managed to prevent them from separating, it was a warning sign for us to do more due diligence and background checks," Xiong said.

But despite the problems facing venture capital firms, investment in the technology sector hit its highest level since 2012 during the second half of last year.

Although the trend is likely to continue, private equity funds and venture capital companies have become more prudent. Li Jianwei, a partner at angel investors ZhenFund in Beijing, tends to concentrate on innovative startups. "China's startup sector is rising, and some of the companies could become industry leaders," Li said.