On Risk Investment And The Use Of Foreign Capital

This thesis is my research about how to develop domestic venture capital investment industry by utilizing foreign capital under the environment of economic globalization Venture capital investment refers to such investment that provides equity capital mainly to technological venture enterprises and offers these enterprises with managerial and consulting services, aiming to take advantage of medium-long capital increment by equity transfer when the enterprises invested have ripened. Venture capital investment mechanism includes originating mechanism, operating mechanism and withdrawal mechanism. It is in fact a special way of capital cycle, which withdraws in good time with high profit intention, companied by high risk. The healthy cycle cannot do without great support of two aspects, i.e., capital entrance and capital exit, that is, two sorts of capital are needed to play distinct roles in different stages of venture enterprises. Therefore, from the point of finance, all funds with potential intention to invest in venture enterprises can be explored and made use of, despite of nationality and locality. Additionally, as a new thing, it faces serious capital shortages at entrance and exit respectively in our country. Based on its internal requirement and the status quo, I think it is feasible to develop domestic venture capital investment by means of attracting foreign capital with certain techniques. The fundamental clue through this thesis is the existing reasons, forms and detailed operating exploration of foreign capital at two different stages of venture capital investment—entrance and exit.Firstly, this thesis analyses its internal requirement for funds decided by its nature, which has not been satisfied at present due to some factors incorporating single principal part of investment, wrong position of objects invested and operation irregularity, difficulty in capital transfer and lack of correspondent policies and laws to guarantee the successful operation of venture capital investment. Such requirement calls for a great deal of venture capital invested in the original undertaking as well as gigantic investment demand for the ripening enterprises when venture capital is prepared to withdraw. Foreign capital can be raised widely through organizations such as venture capital companies and venture capital funds. With unparalleled advantages in professional operation and practical experience, foreign venture capital will in a large degree promote domestic venture capital investment either in solving problem of single principal part or improving capital market liquidity when venture capital withdraws from venture enterprises.Secondly, in order to make way out of the single source of finance and the investment shortage resulting from the hesitation of domestic capital, the proposal is put forward to utilize overseas funds and develop cooperative or joint venture capital investment funds by Chinese and foreign investors. Naturally, attracting foreign capital involves the consequence of international capital flow upon domestic economy. This thesis compares foreign capital inflow in different forms, and concludes that venture capital inflow would neither forms external debts, nor controls domestic enterprises for a long time, which on the contrary is of steady quality and good for domestic high & new industries.Venture capital depends on liquidity and the latter needs withdrawal that realizes in a vast and active market at appropriate time. Then this thesis analyzes the withdrawal way of venture capital investment and proposes that IPO(Initial Public Offering)be adopted by utilizing foreign capital in two aspects. One is concerned with constructing investors. In the stock markets worldwide, institutional investors equipped with advantages of capital, technology and management, such as securities investment funds, are playing a very important role. Before the free conversion of RMB under capital account, it is advised to construct a kind of securities investment fund combined with domestic and...