Venture capitalists are taking a very cautious approach to investing their money following heavy losses with the burst of the dot-com bubble.

This has created a pool of capital US$70 billion deep, but the amount of money invested remains much less than the amount available, Marc Staal, chairman, Hong Kong Venture Capital Association, told the audience at the Venture Capital Partnership Conference on November 1.

For money being sowed in Asia, Hong Kong and Mainland China account for the largest total of that pool, while Japan takes about half of the total amount, he said.

Macro-wise, looking at Asia, the events of September 11 will continue to impact the region for some time. The fact that Japan has been struggling to pull itself up out of the doldrums for the past 12 years will also drag down Asian economies.

China's rapidly growing domestic economy represents one of the few brighter spots in the region. However, Mr Staal said that with China attempting to cover the whole gauntlet of manufacturing sectors, from low- to medium- to high-value areas, Southeast Asian nations will find it harder to attract investments.

People are also getting a bit weary of hearing the 1.2 billion people story, and need to look at the market realistically when they plan to sell their goods to Mainlanders reaching middle-class-hood.

With the market already being saturated, the manufacture of such mundane products as bicycles and mobile phones far exceeds demand.

Hong Kong is also undergoing lots of soul searching as it tries to fit into the China-WTO equation. However, Mr Staal said Hong Kong has a lot going for it, both in its regional role and its Greater China role.