INVESTMENTS

Venture capital investments in China surge to record US$31 billion

PUBLISHED : Friday, 13 January, 2017, 8:53pm
UPDATED : Friday, 13 January, 2017, 8:53pm

Venture capital investments in China hit an all-time high last year despite a global slowdown, with over US$31 billion pouring in as venture capital firms sought to invest in the growing number of innovative businesses in the country.

According to KPMG’s fourth-quarter Venture Pulse report, the US$31 billion came through more than 300 rounds of investment last year, and compares to US$26 billion though 513 rounds in 2015.

“Investors in Asia are shifting their investment focus. While there has previously been a lot of attention paid to online-to-offline (O2O), the second half of 2016 saw investors more focused on artificial intelligence, robotics and big data. There is also increased focus on fintech, education and health care related startups,” said Philip Ng, partner and head of technology for KPMG China.

Venture capitalists in Beijing invested US$18.5 billion, more than half of the total.

Many provincial governments in China have also started to invest in companies, after Beijing identified entrepreneurship and innovation as the country’s new growth engines early last year.

Provinces such as Hubei announced a US$81 billion fund for investments focused on diversifying the job base in the fourth quarter of last year, and will invest funds through venture capital companies such as Sequoia Capital and CBC Capital.

While there has previously been a lot of attention paid to online-to-offline, the second half of 2016 saw investors more focused on artificial intelligence, robotics and big data
Philip Ng, KPMG China

China’s strong venture capital investment performance last year was driven by several mega-deals, such as Alibaba affiliate Ant Financial’s US$4.5 billion round in April, hailed as the world’s largest private technology funding round. Alibaba owns the South China Morning Post.

Strong outbound Chinese venture capital investment is expected to continue, according to KPMG, as companies look to acquire technologies for their home market. The US will receive the majority of Chinese outbound investment, according to the report.

On a global level, venture capital investment slid 9.4 per cent to US$127 billion in 2016, with a 24 per cent drop in the number of deals closed as investors took a more careful approach in the face of market uncertainties.

Early-stage investment, such as angel or seed rounds, took the brunt of the hit globally. In Asia, first-time venture financing fell from US$6.3 million in 2015 to US$4 million last year, KPMG’s report said.

Asia’s total venture capital investment for the year remained steady at US$39 billion compared to 2015, buoyed by large deals primarily in China and India. In comparison, investments in the Americas and Europe declined significantly from US$82 billion to US$72 billion and from US$18 billion to US$16 billion respectively.