This paper examines the history of China’s venture
capital (VC) sector from the late 1980s to the
present day and draws lessons on its decades-long
experimentation with creating financing channels
for early-stage technology business growth. The
author highlights four broad takeaways from the
myriad of policies that China’s policy makers
have employed. These include the importance
of labour market policies that encourage reverse
migration of highly educated and experienced
expatriates; the observations that weak intellectual
property (IP) protection may not necessarily
scare potential VC funds away, especially in
developing countries; that government finance,
when channelled appropriately and combined
with selective deregulation and financial
incentives, can play a positive role in helping
channel capital toward promising technology
firms; and, lastly, that open and liquid domestic
capital markets are neither sufficient nor necessary
for the formation of a vibrant VC sector.

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