US venture capital defies ‘cold winter’ to raise US$15.5 billion for Chinese investments

While Chinese venture capital funds are suffering from what they see as the “coldest winter” in more than a decade, US dollar funds were able to raise more money to invest in Chinese firms last year, according to a new report.

The total amount of US-dollar venture capital raised to invest in the Chinese market in 2018 rose 125 per cent year on year to US$15.5 billion, accounting for almost 35 per cent of the country’s entire market, according to data tracker Zero2IPO. In 2017, US dollars accounted for 28.7 per cent of the funding that went into Chinese investments.

The venture capital market in China was still dominated by the renminbi last year, with yuan-denominated funds accounting for 65 per cent of all investments, according to Zero2IPO’s data.

“While the Chinese VC industry has witnessed big rises and falls in the past several years, US venture capital has been increasing steadily, so [they] were not affected as much by the domestic Chinese environment,” said Wang Hui, a Beijing-based private equity investor and founder of financial technology news outlet Bolian Financial.

Chinese economic growth has slowed amid US-China trade tensions, reducing the liquidity in the country’s banking system which in turn means a tougher climate for Chinese venture capital firms seeking funding. Last year, the overall amount of venture capital raised in China – in both yuan and US dollars – declined by 13 per cent to 302.5 billion yuan (US$44.5 billion).

Separately, data from market search firm Preqin showed that venture capital invested in China slumped 12 per cent year on year to US$18.3 billion in the quarter ended December.