Start-up funding in China remains weak, but may see a recovery this year

Funding for start-ups in China remains at a low point, although the amount raised in the first half is already more than 50 per cent of 2023’s total, suggesting a potential recovery, according to data from mergers and acquisitions (M&A) intelligence provider Mergermarket.

The amount raised in the country peaked at US$132.7 billion in 2021, then dropped to US$67 billion and US$45.4 billion in 2022 and 2023 respectively, according to data presented at the company’s AVCJ Private Equity Forum China in Beijing last week.

From January to June this year, total start-up funding raised in China reached US$25.7 billion. Despite that, the market remains sluggish compared with the pre-pandemic era, though there may be a recovery this year.

“Funding in China may see a slight recovery this year after two years’ decline since 2021,” Yiqing Wang, managing editor at Mergermarket in Asia-Pacific, said at the Beijing event.

Another trend is that dollar-denominated funds have played a much smaller role. Dollar-based funds raised US$2.6 billion, accounting for only 2.5 per cent of the total in the first half of 2024, compared with 44 per cent in 2021, Mergermarket data showed.