Inter­na­tional fund­ing for Chinese start-ups dried up.

Inter­na­tional fund­ing for Chinese start-ups dried up last year, push­ing many fledgling tech­no­logy com­pan­ies to raise cap­ital and list at home instead of on Wall Street.

Dol­lar invest­ments in the coun­try’s new com­pan­ies fell by almost three-quar­ters last year, declin­ing to 19 per cent of the total cap­ital put into start-ups from 39 per cent in 2021, accord­ing to new data from research group ITJuzi.

Chinese investors and founders say geo­pol­it­ical ten­sions with the US, as well as Beijing’s tech crack­down and harsh zero-Covid policy, spooked for­eign investors. «China’s ven­ture mar­ket was very, very dif­fer­ent last year,» said Zhou Xiang, head of Mingde Cap­ital Advisors, which helps start-ups raise fund­ing. «In the past, half of all deals were dol­lar based. Now it’s 70-80 per cent ren­minbi,» he said.

Zhou said that the dimin­ish­ing interest in dol­lars, espe­cially in the coun­try’s tech sec­tor, was in part because founders were nervous about poten­tially being sub­ject to US sanc­tions in the future. As a result, China funds raised only $14bn last year, down from $95bn in 2021, accord­ing to Pre­qin data.

The latest investors to rethink their China strategy are Singa­pore’s sov­er­eign wealth fund GIC and the Ontario Teach­ers’ Pen­sion Plan, two groups which reaped the rewards from China deals in the coun­try’s boom years.

Even with Beijing abandon­ing zero-Covid and eas­ing its tech crack­down, for­eign investors might find it dif­fi­cult to return. So the White House is work­ing to cre­ate a screen­ing pro­cess for US cap­ital flow­ing into China to reduce the flow of money from US investors to Chinese com­pan­ies or sec­tors that help the People’s Lib­er­a­tion Army.

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