BEIJING, Sept.15 -- Shanghai's Pudong New Area government has poured 39 million U.S. dollars into three venture capital firms, which will invest in high-tech firms in the area, the government officials said yesterday.

The 39 million dollars will come from the one-billion-yuan (125 million dollars) Pudong Incubation Fund, a government fund, which was founded last year. The fund is expected to lure a total of 20 billion yuan in venture capital to be used in Pudong New Area by 2010.

The three venture capital firms are DFJ, GobiParnters and Comway Capital, according to a statement from the Pudong Science and Technology Commission.

The Pudong incubation fund is the first regional government fund targeting the VC sector in China.

"The small- and medium-sized firms find it difficult to get listed and expand without external investors as they encounter problems getting bank loans," said Fan Gang, director of the National Economic Research Institute China Reform Foundation, a think tank of the government authority.

The government's incubation fund and the related VC funds will invest in software, semiconductor and bio-tech firms.

DFJ China Fund, in which the incubation fund invested 10 million dollars, has been set up with a value of 100 million dollars. DFJ has so far invested 53 million dollars in firms in Pudong.

The incubation fund invested 9 million dollars in Gobi Fund II, which is expected to raise 150 million dollars in total. The fund, in which IBM and NTT DoCoMo have stakes, will invest in the digital media sector.

Comway's fund has attracted 20 million dollars from the incubation fund. Shanghai-based Comway mainly invests in IT, bio-pharmaceutical and new materials.

Other VC firms, such as IDG, have also signed a deal with the Pudong government on joint investment in the region.

Boosted by the VC investment, Pudong's high-tech industry output will reach 300 billion yuan in 2010 from 160 billion yuan in 2005, according to the district government.

(Source: Shanghai Daily)