Investor sentiment has worsened globally
Venture capital investment in China fell nearly 30% year-on-year in the first 10 months of 2023 as economic uncertainty continues to weigh on investor sentiment.
In China, US$34.6 billion was invested in 2,675 venture capital funding deals between January and October this year, a “significant decrease” compared to the same period last year, according to a report published by data analytics firm GlobalData. The data reflects a 29.1% drop in deal value and a 15.7% drop in venture capital deal volume over the period, according to GlobalData.
Some of China's most notable deals during this time include a US$1.8 billion government investment in automotive chip maker GTA Semiconductor, as well as a US$1 billion fundraising by electric vehicle maker Rox Motor Tech.
Chinese research firm Zero2IPO Research found that the number of deals in the country in the first nine months from venture capital firms, private equity firms and other early-stage investment firms fell 25.9% year on year. China's total private investment value over the same period also fell 31.8% year-on-year, according to Zero2IPO.
The decline in venture capital activity in China comes as the country struggles to recover from years of tough anti-pandemic restrictions, regulatory crackdowns on the private sector and escalating geopolitical tensions that have Washington scrutinizing cross-border investments.
Venture capital funding focused on investing in China fell 54.2% from April to June this year compared with the previous quarter, as investors become increasingly reluctant to bet on the country engaged in a trade war with the United States.
US venture capital giant Sequoia Capital said in June it was splitting its business into three geographical divisions, each with a separate brand, including an independent Chinese company, amid intensifying rivalry between the world's two largest economies.
The decline in private equity deals in China also comes amid a global industry slowdown as governments and central banks battle inflation by raising interest rates.
“The decline in the volume and value of venture capital funding deals is now a global phenomenon, and China is no exception to this trend,” writes GlobalData lead analyst Aurojyoti Bose. “China continues to dominate the Asia-Pacific venture capital market despite the downturn.”
China also remains a “key” market in the venture capital industry. China accounted for 15.8% of the total number of venture capital funding deals worldwide between January and October and 17.1% of the total value of global deals. The US accounted for 35% and 48.8% of the number and value of transactions, respectively.