As long as China keeps growing, sectors such as consumer goods will thrive. The downturn has caused sellers of businesses to cut their prices, creating a flood of attractive deals to private equity and venture firms, Yan said.

But there are still roadblocks to private equity in China. For one thing, there is no market right now for firms to cash out of their investments through IPOs, Yan said. "In the next three years, the exits (from investments) will be offshore," he said.

And while China is rife with deal opportunities, many investment firms have turned inward to tend to their existing companies, rather than seek out new opportunities in the downturn.

Still, the Chinese government is fully supportive of private equity, viewing it as an important means of financing for businesses, according to Cao Wenlian, deputy director of the department of finance and fiscal affairs with the National Development and Reform Commission.

Gao said at the conference that the Chinese government is discussing ways to encourage foreign-based private equity and venture firms to establish investment funds. Along these lines, the Chinese government is also working on regulations and policies for institutions in China, such as banks, to become investors in private equity and venture funds, Gao said.

Currently, one large investor - or limited partner - in private equity in China is the social security fund.

(China Daily May 11, 2009)