But Sea’s current fortunes contrast sharply with its mainland China peers, which have been battered by Beijing’s regulatory crackdown on Big Tech. Tencent’s shares are currently down 40 per cent from a 2021 peak and Alibaba – owner of the South China Morning Post – is trading at less than half its level in October 2020.

The Chinese government’s war on the “irrational expansion of capital” started last autumn when the mega initial public offering of Ant Group, Alibaba’s fintech affiliate, was called off at the last minute due to uncertainty over changes to the regulatory environment. It has continued with antitrust probes into Alibaba and services giant Meituan, a draconian crackdown on private tutoring and a data security probe of ride-hailing giant Didi Chuxing.

For good measure, Beijing has imposed strict time limits on the amount of time under 18s spend on games to prevent gaming addiction and urged internet firms to guard against inappropriate content and promote “positive values”.

This has forced investors and venture capitalists to re-evaluate China’s tech sector and question whether the undoubted potential is worth the escalating risk.

Beijing’s tech crackdown kills the golden goose for young workers

Big-name investors from George Soros to Softbank’s Masayoshi Son have sounded warnings. Cathie Wood, the chief executive of Ark Invest and a widely-followed tech investor, has cut her China positions significantly.

Some analysts say a portion of the money that has left Big Tech in China is finding its way to other parts of Asia.

One Chinese tech investor in Hong Kong, who declined to be named as he is not authorised to talk with media, said many investors are allocating funds to tech start-ups in other parts of Asia. “Look at Sea’s stock rally, some of that money would have been in Tencent or Alibaba without the tech crackdown from Beijing,” the investor said.

India could be another beneficiary of asset managers diverting tech investment from China.

Paytm, an Indian payment service provider with funding from Alibaba, has filed a prospectus for a US$2.2 billion initial public offering in India soon, which will likely be the biggest in the country for at least a decade. A successful IPO of Paytm, which is also backed by Softbank and Warren Buffett’s Berkshire Hathaway, could increase the lure of India for money chasing returns.

“Given that Chinese companies are seen as increasingly risky, global investors will naturally start to look elsewhere, to places like India,” said Mark Witzke, a research analyst at Rhodium Group with a focus on China’s international investment, industrial policy and technological development.

Sumant Mandal, a managing partner at US venture investor March Capital Partners, was quoted by Bloomberg on Tuesday as saying that China’s tech crackdown would send global investors seeking emerging-markets exposure to other places like India.

In the second quarter, VC funding for Indian start-ups reached a record while investment cooled down in China from an all-time high in the fourth quarter of last year, according to market intelligence firm CB Insights. However, China’s VC funding overall was still much bigger at US$22.8 billion in the second quarter, compared with India’s US$6.3 billion, CB Insights data shows.

Xi Jinping calls for more Party ‘guidance’ as Big Tech crackdown continues

“China’s market is of a size and scale that’s unmatched,” Mandal said. “But the risk-reward structure around China has changed” and investors from the US, Europe, Asia and the Middle East are now looking to balance their portfolios by re-routing investments to neighbours, he said.

At the same time, any shift of funds from China’s tech sector to other Asian markets will likely be a long and complicated process due to different local situations. At the same time, there are some investors who consider current valuations in China’s tech sector as a classic “buy on the dip” situation.

William Bao Bean, general partner at SOSV Chinaaccelerator, a Shanghai-based firm that helps investors in China and India, said India is not an easy place to access for foreign investors. “India is very hard to invest in for foreigners, in terms of tax rates and regulation,” Bean said. “In fact, it remains harder for foreigners to invest in India than it is to invest in China.”

Bean said his capital exposure in China accounted for roughly 25 per cent of his portfolio over the past three or four years. “Now, with the recent changes. I’m actually looking to increase my exposure to China,” said Bean, pointing out that China’s antitrust drive is breaking the duopoly of Alibaba and Tencent, opening the way to more competition and investment opportunities.

Bean said regulatory change has always been part of China’s market environment and investors need to adapt. The current change in China also comes as the market has matured, with 71 per cent of the population already connected to the internet compared with 50 per cent in India, according to government data.

Rhodium’s Witzke said that to cope with China’s risks, “global investors will need to move past the mainstream media headlines and engage more deeply with Chinese policy documents and other Chinese sources”.