A total of $3.7 billion was invested in 202 rounds of venture capital investment activities in China in 2012, down about 40 percent year-on-year, a report from Ernst & Young said.

Despite the significant drop, the report said the median value of the investments was $10 million yuan ($1.6 million), much higher than that in other parts of the world, due to substantial investments in profitable companies in China.

Beijing became a popular investment destination for VC investors in 2012. The average round size was $19.9 million, well above the global average of $8.4 million.

“We expect the VC market in China to rebound in the second half of 2013. Although growth will be steady, we do not anticipate a return to the heights of recent years,” said Lawrence Lau, Greater China Venture Capital Advisory Group Leader of Ernst & Young.

Investments were down in all markets and the amount of financing in the seed and first-round stages dropped across regions, according to the report.

Globally, venture capital investment fall 20 percent to $41.5 billion and the number of rounds declined 8 percent to 4,970 in 2012.

However, experts said investors would see the industry turn the corner and steady economic conditions will help rebuild investors’ confidence.

“2012 was a tough year for global venture capital and we saw consolidation in the market as the number of active investors declined. However, we are hopeful that 2013 will see the industry turn the corner. Steadying economic conditions will bolster investor confidence and point towards a strengthening risk appetite,” said Ringo Choi, Asia-Pacific Strategic Growth Markets Leader of Ernst & Young.