China’s state VC fund now has $336b to throw at startups

China’s state VC coffers have exploded in size in recent years, holding US$336.4 billion for investing in the nation’s startups at the end of 2015. The data from Beijing-based VC Zero2IPO shows that figure has tripled since 2013.

There could be some bubbles in certain sectors.

In reality, there’s no one single fund. The sum is made up of government guidance funds, consisting of local and central agencies. There are now 780 such funds across China, explains Bloomberg in its analysis of the Chinese report.

The coffers were topped up last year by a record 297 newly established funds, worth US$$231 billion. That eclipsed the US$44.3 billion that was thrown into the pot by 83 new entities in 2014.

The state money dwarfs private capital going into startups, though the 2015 boom mirrors a surge in overall funding going to China-based startups. Tech investments in Chinese startups reached a new height in 2015 with disclosed deals worth US$36 billion made mainly by private VCs in consumer-focused startups, according to the Tech in Asia database.

However, those startups – making the kind of apps and services that ordinary people use – make up a not very sizeable slice of the nation’s huge tech, science, and manufacturing industries.

Hot cash

The flood of government cash raises fears of all the steam bursting out of China’s heated tech industry, where billion-dollar investments into a single startup – like Uber rival Didi Kuaidi with its US$3 billion series E round in September – becoming increasingly common.

The huge sum raised in 2015 won’t flood into the market this year.

Some of China’s newest injection of state VC money will go into setting up new startup funds or investment bonds in conjunction with the private sector, as with Shanghai-based Gobi Partners, a VC that has made dozens of investments in consumer-oriented startups in China and across Southeast Asia.