Venture capital to China evaporates amid geopolitical hostilities and economic uncertainties
- China-focused VC funds raised US$2.7 billion from April to June, down 54.2 per cent from the previous quarter, a Preqin report shows
- Investments raised by Chinese internet sector plunged nearly 70 per cent year on year in the second quarter, a state-backed think tank says
Funding for venture capital (VC) firms that invest in China evaporated rapidly in the second quarter, as investors grew increasingly hesitant about betting on a country struggling with overhanging economic woes and geopolitical tensions with the US, according to a new report by research firm Preqin.
China-focused VC funds raised US$2.7 billion from April to June, down 54.2 per cent from the previous quarter, the report said. The decline was a major contributor to an overall fall in VC fundraising in Asia-Pacific, where numbers reached a five-year low, Preqin said on Thursday.
2023 could also be the worst fundraising year in a decade for all types of private capital in Asia-Pacific, driven by a shift in investment sentiment away from China, according to Preqin.
“Fundraising in [Asia-Pacific] remains uncertain due to lingering economic issues and persistent geopolitical tensions, while investors remain cautious about returning to China,” Preqin analysts wrote.
The China Academy of Information and Communications Technology, a state-backed think tank in Beijing, said on Friday that total investments in the Chinese internet sector plunged 69.8 per cent year on year in the second quarter, while the number of investment deals dropped 60.9 per cent.