More than half of China's mid-sized companies will seek to raise capital within the next two years, highlighting an urgent need for funding to fuel rapid expansion, a survey showed on Thursday.

Law firm Pillsbury said its survey of nearly 200 individuals operating and investing in the companies showed that 55 percent planned to raise funds in the next 24 months, with 43 percent expected to do so this year.

More than 40 percent of respondents said an initial public offering was the most effective way to raise capital, with 45 percent expressing a preference to list in Hong Kong or on mainland China exchanges, and 30 percent preferring a U.S. listing.

This survey shows a growing preference among Chinese companies for underwritten public offerings and increasingly larger deal sizes, Tom Shoesmith, head of Pillsbury's China practice, said in a statement.

Last year the Shenzhen exchange, which focuses on IPOs of small- and medium-sized companies, overtook Shanghai as the top IPO market, with proceeds totaling $44 billion compared with $25 billion in Shanghai, according to Thomson Reuters data.

($1=6.83 Yuan)

(Reporting by Samuel Shen and Kazunori Takada; Editing by Chris Lewis)

China