Pitchbook – Greater China Venture Report, 1H2023

In the first half of 2023, the Greater China venture ecosystem experienced a slowdown in investment activity. Despite a total investment of $26.7 billion across 3,072 deals, General Partners (GPs) are being cautious due to the fundraising climate and lack of significant returns from public exits. Megadeals, which are funding rounds over $100 million, are expected to reach their lowest level since 2015, indicating a decrease in available capital for the regional venture ecosystem. Foreign investment in the region has also declined, accounting for only 10% of deals in H1 2023, the lowest figure ever recorded. Various factors have contributed to this, including Chinese government restrictions on foreign investment in venture capital, particularly through its tech crackdown and limitations on foreign IPOs, although there has been a slight softening in Beijing's stance. Additionally, the protective nature of high-interest sectors and China's struggling post-pandemic economy have deterred foreign investors. To complicate matters further for US investors, on August 9, 2023, the Biden administration issued an executive order prohibiting US VC firms from investing in Chinese startups operating in high-tech sectors such as semiconductors, quantum computing, and AI. This puts US investors under increased scrutiny and regulatory scrutiny when investing significant capital in the Chinese market.