US venture capital in China tumbles as tech decoupling deepens, report says

US venture investment in China is expected to plunge to a six-year low for 2019, as a deepening technology decoupling between the two countries rips apart early-stage deals.

The volume of American venture capital investment in Chinese start-ups is estimated to fall to less than US$4 billion in 2019 from its peak of US$17.4 billion in 2018, according to a report published by Rhodium Group and the National Committee on US China Relations on Monday.

The retreat was attributed to a combination of a cooling Chinese technology sector, policy headwinds and political uncertainty caused by the prolonged trade war between the world’s two leading economies.

The report, reviewing US-China venture capital trends over the two decades ended 2019, calls on US policymakers to “avoid disruption and unproductive decoupling without purpose”.

“The US must more narrowly articulate China-specific security and economic concerns,” said the report’s authors, led by Rhodium’s Adam Lysenko, a data analyst at the American research firm.

“Leaders must weigh marginal increases in national security against the economic and security costs of limiting participation in the US technology sector.”