SAN FRANCISCO – Venture capital investment in China is as red hot as the country’s booming economy, according to the latest statistics from Dow Jones VentureOne and Ernst & Young.

In 2006, investors made 214 deals worth $1.9 billion. That’s a 55 percent increase over the $1.22 billion invested in 2005, the VentureOne and E&Y report said.

By comparison, venture firms invested more than $28 billion in U.S. firms in 2006.

However, that’s not the highest amount invested in China by venture capitalists since VentureOne and E&Y began reporting statistics in 2001. Investments topped $2.8 billion in 2001 and $2.4 billion in 2003.

The 2006 deal trend included only six seed stage deals worth $127 million. The number of investments was down from the 13 in 2005, but the value was might higher than the $93 million the previous year.

Nearly half the amount invested –$920 million – went into information technology deals. Business and consumer applications drew $613 million. Both totals were up substantially from $686 million and $438 million respectively the previous year.

"In 2006, venture capital investment in China was dominated by a progressive development of the venture capital eco-system and a diversification of the industries that were attracting investors,” said Bob Partridge, China leader of Ernst & Young’s Venture Capital Advisory Group.

“While information technology remains the dominant industry for investment, there was significant investment growth in areas such as healthcare, business, consumer and retail companies and clean technologies,” he added. “The continuous growth of the Chinese economy and the middle class in China – as well as the increased focus on innovation – are the primary drivers for the significant investment growth in these sectors.”