A handful of lucrative exits has got both foreign and domestic firms racing to sign new deals despite daunting challenges ranging from unpredictable regulations to restrictions on entering some sectors of the fast-growing economy. "It used to take around two months to make a final decision on a deal," Li Jianguang, a partner at a Beijing-based venture capital firm IDG Technology Venture Investment, told the annual meeting of the China Venture Capital Association.
"If we wait two months nowadays, the project could be snapped up by a competitor," he said. An estimated $5 billion in private equity and venture capital funds earmarked for China still had to be invested, a sum that was likely to double within three years, said Chang Sun, the association's chairman.
"Growth of deal flow is going to be very healthy in the coming years," Sun said on the sidelines of the forum.
Opportunities were already being mined across the spectrum of start-up investments to growth and buyouts, he said.
Foreign private equity firms started to set up shop in China in the early 1990s, but only now are their labours paying off.
Earlier this year, Morgan Stanley and Goldman Sachs generated a return of roughly 14 times on a combined $70 million investment they made in 1994 in Ping An Insurance Co. They sold the stake in China's second-largest life underwriter to HSBC Holdings.
And venture capital firm Doll Capital Management netted returns of up to 20 times following the listing of Shanghai-based career services provider 51job.com.
Despite their innate optimism, industry executives say growing competition is making it harder to close quality deals. As a result, the need to set their firms apart from their rivals is ever more pressing.
Hina Group Inc, an investment bank and private equity firm based in Palo Alto, Calif., says strong demand is bumping up deal prices in the sectors in which it specialises - the Internet, digital media and semiconductors.
"Our strategy is to get in earlier, before a company has a solid management team and before it gets institutional investors," said Hina's managing director, Steven Xi.
For Kathy Xu, managing director of Capital Today, a Hong Kong-based venture capital fund, the key to success in a country where a good business idea quickly attracts copy-cats is to hunt down management teams with proven track records.
The hunt may require patience. It took Carlyle Group, a top global private equity firm, two years to complete the purchase last month for $375 million of an 85 percent stake in Xugong Group Construction Machinery Co, China's largest buyout yet.
Because the negotiation and approval process can take so long, meticulous selection of potential investments was even more important in China than elsewhere, said John Lewis, president of J.P. Morgan Partners Investment Consulting (Shanghai) Co Ltd.
The rewards, though, can make the wait worth the while.