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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.

China

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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  1. Sam20 February 2023 at 10:06

    The zero-Covid approach was a major mistake by China. It tanked their economy and things will not get back to normal without at least a few years passing. They were so focused on something that was clearly impossible that they didn't pay attention to what they had going for them and now they've lost it.

    ReplyDelete
  2. Oliver20 February 2023 at 10:30

    The US-China relationship needs to get back to some kind of normal but it will take some time. Blocking these relationships altogether is bad for everyone involved.

    ReplyDelete
  3. Grace20 February 2023 at 12:39

    China did a great job in scaring most investors. Whether they were foreign or not, most realized they needed to invest elsewhere at least for the time being. Some major players have left China for good because of current events and problems but also because they didn't want to risk losing everything if China's leaders may decide they were a threat.

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