IDG Capital targets China’s consumption shift in real estate investment strategy
The company prefers long-term projects in areas including tourism and health care, where demand is growing
IDG Capital, one of China’s first venture capital firms, is targeting the country’s shift towards a consumption-driven economy in its real estate investment strategy, seeing value in long-term tourism and health care projects.
Zhai Ping, a partner with IDG Capital, said in an interview that the company had found success in previous tourism projects, where it offered both operational expertise as well as investment in physical infrastructure, and was looking to expand the approach.
“Most of our funds are 10 years. Tourism and health care projects require long incubation periods and are unlikely to succeed with a five-year investment rule,” Zhai said.
The Chinese government has a stated policy of shifting the economy’s traditional reliance on investment and the export industry for growth into one where consumer spending and domestic demand are the main drivers.
One pillar of that plan is domestic tourism, which has boomed in recent years. Revenue from domestic tourism reached 2.17 trillion yuan in the first half of last year, a rise of almost 16 per cent over the same period the year before. The figure also represents an almost threefold rise over the 777 billion yuan for 2007.
Zhai said IDG Capital had been building expertise in tourism projects since 2009, when it invested in large-scale development in the city of Wuzhen, near Shanghai. It exited the investment after a profit that some reports put at four times its initial investment. IDG Capital did not give a figure.