China market loses its shine for private equity investors as nation’s economy slows, zero-Covid-19 policy remains in force

Name: China’s harsh Covid restrictions leave thousands of migrant workers in limbo
Uploaded: 2022-05-08T04:00:22.000Z
Duration: 6 min 13 s
Description: China’s harsh Covid restrictions leave thousands of migrant workers in limbo

Venture capitalists are biding their time on new investments in China amid increased uncertainty in the market

Investors see challenges posed by Beijing’s strict zero-Covid-19 policy, tensions in US-China relations and Russia’s war with Ukraine

Reading Time:4 minutes

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The stakes have never been higher for both venture capitalists and Chinese firms, as they try to navigate an uncertain regulatory environment, ongoing geopolitical tensions and slower economic growth. Illustration: Shutterstock

Tracy QuandYaling Jiang

Published: 12:00pm, 8 May 2022

For a long time, China was a gold mine for venture capitalists. Many investors reaped the rewards from solid bets on internet titans such as Alibaba Group Holding in e-commerce, Tencent Holdings in video gaming and social media, Meituan for on-demand delivery, and ByteDance for global hit short video app TikTok.

The past two years, however, has been challenging for the world’s second-largest economy, following the disruptions caused by the coronavirus pandemic, a sweeping regulatory crackdown on Big Tech firms and more recently, Beijing’s strict implementation of its zero-Covid-19 policy to counter the latest outbreak in the country.

These have all put a strain on economic activity, which has resulted in venture capitalists biding their time on investments in the country, according to interviews with several private equity investors and market analysts.

“Investors are taking a wait-and-see approach and being very cautious about investments in China,” said Zhou Hao, head of Greater China private equity practice at management consulting firm Bain & Co, in a recent media briefing. He indicated that tensions in US-China relations and Russia’s war with Ukraine also “pose as a great challenge to the global supply chain and China’s economy”.

06:13

China’s harsh Covid restrictions leave thousands of migrant workers in limbo

“There have been many [government] policy adjustments since the second half of last year, so it is very common that investors – especially overseas investors – are worried about the uncertainty [brought by these changes],” Zhou said.

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