China’s economic tumult slows ‘unicorn’ stampede as US sees billion-dollar valuations soar

Although it still has the second-most unlisted firms worth at least US$1 billion, China added just 15 in the past year amid Covid and policy regulations, while the US total grew by 179
TikTok parent ByteDance remains the world’s most valuable unicorn, topping Elon Musk’s SpaceX in the second spot

China's economic recovery

Frank Tangin Beijing

Published: 9:00pm, 19 Apr, 2023

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After holding a slight edge before the pandemic, China has fallen well behind the United States in one of the key indicators in their race for economic and technological supremacy – the number of home-grown firms valued at more than US$1 billion, also known as “unicorns”.

The widening disparity has set off alarms among Beijing’s policymakers, who are pinning hopes on domestic innovation and the cultivation of a more mature digital economy. And it comes at a time when the US has ushered in the game-changing artificial intelligence chatbot known as ChatGPT, while also imposing bans on high-end computer chips in a bid to contain China’s technological advances.

Unicorns, which achieve their billion-dollar valuation without being listed on the stock market, are often viewed as an important measurement of a nation’s business environment and economic vigour.

Before the pandemic, there were 494 unicorns in the world, with a total valuation of US$1.7 trillion. Now there are 1,361, valued at US$4.3 trillion, according to the 2023 Global Unicorn Index released by the Hurun Research Institute on Tuesday.

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The US leads the list with 666 unicorn firms, including Elon Musk’s SpaceX and fintech start-up Stripe. This marks an increase of 179 from the past year, and an increase of 463 in the past three years.

China ranks No 2 globally with 316 unicorn firms – up by only 15 in the past year and by 110 since 2020.

China also boasts the world’s most valuable unicorn, ByteDance, the parent company of short-video-sharing app TikTok. Other big Chinese names include Ant Group and WeBank. Ant Group is an affiliate of Alibaba, which owns the South China Morning Post.

The rankings are prone to fluctuating market valuations. However, a similar trend was found by Israeli fintech firm Tipalti, whose annual ranking identified 248 Chinese unicorns, or 17.3 per cent of the world’s total – far fewer than 712 in the US, which accounted for 49.8 per cent of all unicorns.

Hurun’s findings indicated that the main sectors of US-based unicorns were cloud computing, fintech and health tech, while their Chinese counterparts were concentrated mainly on artificial intelligence, semiconductors and e-commerce.

China now finds itself at a critical juncture in terms of cultivating economic growth, as its growth model – long fuelled by investments and exports – is facing unprecedented challenges. Local-level debt has been rising nationwide, demographic shifts and a shrinking population are sending worrying signals, and an economic decoupling from the US is intensifying.

Meanwhile, the world’s second-largest economy is in the midst of upgrading its economic structure and attempting to fuel home-grown innovation, as highlighted by Premier Li Qiang’s high-profile visit to unicorn companies last week. These included a satellite maker, an energy-storage company and a smart-driving technology company.

“Unicorn firms have high growth potential, which to a certain extent represents the direction of economic transformation and upgrading,” he was quoted by the official Xinhua as saying. “Technological enterprises should take innovation as their mission, devote more energy to breakthroughs in key core technologies … and contribute to our country’s high-level technological self-reliance.”

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Hurun’s chairman and chief researcher, Rupert Hoogewerf, noted how “OpenAI’s ChatGPT has had perhaps the largest impact across the world of any unicorn, shooting up in value to US$20 billion and hitting the milestone of 100 million users in just over two months”.

In response, Chinese tech companies have been scrambling to catch up, with their own versions of chatbots, especially in big cities with innovation ecosystems.

Beijing leads China with 79 unicorn firms, followed by 66 in Shanghai, 33 in Shenzhen, and 22 respectively in Guangzhou and Hangzhou.

Hong Kong is not listed among Hurun’s top-30 start-up cities, which requires a minimum of 9 unicorns. Lalamove, a Hong Kong logistics company expected to be publicly listed soon, was ranked the 30th largest unicorn, with a valuation of US$13 billion.