Anybody who believes the tech bubble has already been worked through needs to take a look at the venture capital industry in China. Many of the funds were set up during two record years of funds raising in 1999 and 2000 but the collapse in tech valuations has caused many of the venture capitalists to sit on their hands.

In its recent China Venture Capital survey, CMS Cameron McKenna found that management of existing portfolios is the greatest focus. According to the survey, 50% of the respondents said this was their primary focus over the last 12 months.

China's difficult financial and regulatory environment is also felt to have played a role in stifling growth. Venture capitalists need exit strategies like a drunk needs his whiskey bottle, and they are not clear-cut in China. Although regulations are moving toward allowing foreign funded enterprises to list on the domestic stock markets, it is not likely these will be effective for a while, according to Chris Southorn, the partner at McKenna responsible for the survey.

"Even when these regulations do become effective, there will be a huge backlog of foreign funded companies wanting to list," he comments.

There has, however, been a way for venture capitalists to get some return on their investment and that is by listing on Hong Kong's GEM market.

"Chinese foreign funded companies which want to list on the GEM need a letter of no objection from the China Securities and Regulatory Commission and a legal opinion from a Chinese law firm. But the process is rather simple," Southorn comments.

The listing is normally done via an offshore holding company. Yet the market's poor reputation following the collapse of Hong Kong's own tech bubble means that potential IPO's would almost certainly pay a price in terms of the valuation they would be able to achieve.

After tech, the most popular VC sectors (by number of top three rankings) were telecoms, semi-conductors/electronic components, business/support services and internet technology/software.

Another characteristic of VCs in China is their reluctance to get involved in startups. The overwhelming investment of choice is pre-IPO. This risk aversion, so characteristic of the Asian VC industry, is doubly counter productive, since IPO opportunities are so difficult to achieve.

Yet 18% of respondents say they will cease to fund startups altogether. Does this have something to do with the quality of the investment proposals VC companies receive from China's entrepreneurs?Some 41% of the respondents to the survey said the quality of the proposals they received contributed to their difficulties in China.

The destination of the funds also shows a lack of adventurousness within the Chinese VC industry. Shanghai and Beijing are by far the largest destinations for investments, with Shenzhen coming a distant third.

It is tempting to allude to China's history when it was sliced up by various foreign powers - the Germans in Shandong, the British in Hong Kong and Shanghai, the French in the fancy concessions in Shanghai, and the Japanese ravaging the North East. Today a globalization has brought a more benign form of the same, with the Hong Kongers beavering away in the Pearl River Delta, the Taiwanese in the cut price provinces around Shanghai, and the Americans and Europeans investing in the priciest investment area of Pudong and Puxi.

Yet some say it is strange that Guangzhou receives such a small amount of VC investment. It is the capital of the richest province in China, with a GDP which passed $1 billion this year and led the charge during the early stages of China's opening up. Now, however, it seems to losing its share of investment dollars to the glamorous image of Shanghai, an image which the city government and foreign investment banking community have burnished to a dazzling shine.

McKenna's Southorn says this is because Shanghai and Beijing are China's most internationalized cities. "Investing in Guangzhou requires a more pioneering spirit," he comments.

On the bright side, VCs believe that the coming 12 years could be better than last year. "It's hard to say if that's because the change in sentiment comes from such a low base, or whether things will genuinely pick up," cautions Southorn. However. 63% of the respondents believe the IPO market will pick up, and even more reassuringly 86% believe deals in the coming year will be as big or bigger than in the past.