Very good question :)

While there are many wealthy individuals in China today(related to your "big" GDP), there are few local "professional-grade" venture investors - investors who bring on board not only capital, but also industry expertise, relationships, management talents, corporate governance, financing and investment banking skills. Traditionally, these professional investors (usually Chinese themselves) were trained and groomed in the West (US mostly) and opened up Chinese operations (of US VC firms) in China. Keep in mind that VCs are "middle men", they invest using other people's money.

Up to today, about 80% of the VCs operating in China raise their funds outside China (primarily US). Investors to these funds are the university endowment funds, retirement funds, corporate pension funds, etc--these are called limited partners (LPs). LPs are the provider of money but they don't interfere with the VCs operations. There has yet to be an LP culture (give your money to a VC and then hands off, paying them 2+% management fee annually and 20% carry, etc) in China, therefore the VCs prefer to raise money outside China - hence the funds are usually registered at Kayman Islands, raise money in the US and people call them "US" VCs.