Venture Capitalists Catch China Fever

Kathy Xu is one satisfied investor these days. As China head of Baring Private Equity Partners (Asia), she has made eight deals to provide financing for local startups in the past five years. Five have either been sold or gone public, netting Barings a profit of $101 million on investments of $27 million. "People are really starting to make serious money," says Xu.

Xu isn't the only venture capitalist whistling her way to the bank. Thanks to a rash of initial public offerings, privatizations, mergers, and takeovers, opportunities for private-equity investors in China have never looked better. Last year, China attracted $1.57 billion in private equity, up from $350 million in 2002. This year, $150 million has already been raised, and all it would take is a couple of big deals to beat last year's level. "China is hot," says Chauncey Shey, CEO of Softbank China Venture Capital, which has a multimillion-dollar investment in Alibaba.com, an Internet portal.