China venture capital funding plunges amid slowing economy and weak global investor sentiment
- GlobalData figures represent a fall of 29.1 per cent in terms of deal value and a 15.7 per cent decline in the number of VC deals across the period
- Decline in VC deal activity follows several years of strict anti-pandemic curbs, a regulatory crackdown and rising geopolitical tensions
Venture capital (VC) funding in China in the first 10 months of 2023 declined nearly 30 per cent from the same period last year as economic uncertainties continue to weigh on investor appetite.
China saw US$34.6 billion invested across 2,675 venture capital funding deals from January to October this year, a “considerable decline” from the same period last year, according to a report published by data analytics firm GlobalData on Friday.
The data represents a fall of 29.1 per cent in terms of deal value and a 15.7 per cent decline in the number of VC deals across the period, according to GlobalData.
Some of China’s most notable transactions during this time include a US$1.8 billion state-led investment into GTA Semiconductor, an auto chip manufacturer, and a US$1 billion fundraising by electric vehicle maker Rox Motor Tech, GlobalData said.
In a report published earlier this week, Chinese research firm Zero2IPO Research found that the number of deals in the country in the first nine months across venture capital, private equity and other early stage investment firms dropped 25.9 per cent year on year.
Alibaba and Tencent lead US$342 million total investment this year in Zhipu AI
China’s total value of private investments in the same period also plunged 31.8 per cent from last year, according to Zero2IPO.
The decline in venture capital activity in China comes as the country struggles to recover from several years of strict anti-pandemic curbs, a regulatory crackdown on the private sector and escalating geopolitical tensions, which has seen Washington scrutinise cross-border investments.
US venture capital giant Sequoia Capital said in June it was splitting its business into three geographic units, with each adopting a distinct brand, including an independent Chinese entity amid increased rivalry between the world’s two-largest economies.
However, China’s decline in private investment deals also comes amid a global VC industry slump, as governments and central banks have battled inflation by raising interest rates.
In the first 10 months of 2023, the number of VC funding deals in the US declined by 40.6 per cent year on year, while total funding value dropped 43.6 per cent, according to GlobalData.
“The decline in VC funding deal volume and value is now a global phenomenon and China is not an exception to this trend,” GlobalData’s lead analyst Aurojyoti Bose wrote. “China continued to dominate the Asia-Pacific VC landscape despite the decline.”
China also remains a “key” market in the VC industry and “stood just next to the US” in terms of both deal number and value, Bose wrote.
China accounted for 15.8 per cent of the total number of VC funding deals globally between January and October and 17.1 per cent of the total value of global deals, the firm wrote. The US accounted for 35 per cent and 48.8 per cent of deal numbers and value respectively, it said.
