China’s deeptech boom leaves Western investors playing catch-up

Securing an exit is notoriously difficult for startups in the deeptech sector. Timelines to build a viable product are long, fundraising is difficult, and successful companies attract few buyers.

It’s especially hard if your firm isn’t from China, it seems.

Image credit: Arsal Ysfin

Deeptech exits across AI, robotics, energy, and space in the country reached US$259 billion in 2025, surpassing the US at US$206 billion, data from Crunchbase and ITjuzi shows. Beyond Chinese battery giant CATL’s landmark IPO, the growth was driven by a combination of large primary listings, including Moore Threads and MetaX, as well as secondary listings in Hong Kong such as WeRide and Pony.ai.

The data is clear: China has quietly become the world’s leading market for deeptech venture returns.

Yet global investors remain skeptical: The share of Chinese funding rounds with at least one direct overseas backer has fallen from 27% (2021) to 18% (2024) and 11% (2025), based on Crunchbase data. Challenges concerning geopolitics and structuring continue to deter many Western allocators, apparently.

The disconnect between China’s deeptech performance and global investor participation is the defining tension in venture capital right now. The question isn’t whether the country produces returns – it’s whether the obstacles standing between foreign investors and those returns are genuinely prohibitive or simply unfamiliar.

What’s keeping investors away

The numbers make the case for China, but for most global investors, the hesitation isn’t about returns. Instead, it’s about everything that obstructs their access to those returns.

Here are the three main challenges:

1. Geopolitical tensions

Global geopolitical shifts are driving two major consequences for investors in China.

First, increasingly strict export control restrictions are making it harder for foreign players to invest in deeptech firms in the country. For example, the US restricts its citizens from backing dual-use, semiconductor, quantum, and large language model companies from “adversary countries,” including China.

Export controls in the European Union, the UK, and other Western countries apply mostly to investments in dual-use companies, meaning those with both civilian and military applications. They include tech transfer but usually exclude passive minority investments.

See also: These are the most active investors in China’s startups

Opportunity amid turbulence