The near-empty room for VC funding in China

“No one likes to talk about a falling market” is a lesson I learned early in my career as a financial journalist.

When the price of gold cratered to US$250 per ounce in 2001, traders I called for my daily market comment told me to stop doing so. “There’s nothing going on” was the common refrain.

If the adjective “uninvestable” was as commonly used back then as it is now, it would have been an apt description of gold. The precious metal has since shrugged off that tag, as demonstrated in its ascent to record highs this week.

The current state of China’s VC market brings back memories of those dim days for gold.

Image credit: Timmy Loen

Having shrunk every year since 2021, VC funding in China plunged 36% in the first eight months of the year compared with the same period in 2024, according to UK-based data analytics firm GlobalData.

The decline narrows China’s share of the global VC market to around 7% from 14% in the same period in 2024, the analytics firm said last week, without providing specific figures.

GlobalData lead analyst Aurojyoti Bose said in the report that the steep decline in funding value is due to a slowdown in big-ticket rounds as well as investor wariness. This is mainly because of “macroeconomic uncertainty, geopolitical tensions, and regulatory pressures that have further dampened sentiment.”

Lowest in more than 10 years

KPMG, which issues quarterly reports on global VC activity, said in July that deal value in China – still the world’s second-biggest VC market – fell to US$4.7 billion in the second quarter of 2025, its lowest in more than a decade.

The drop in VC deal values in China mirrors a global trend since 2021, when low interest rates and pent-up demand from Covid fed a boom. But while global VC deal values have risen year on year since the last quarter of 2024, China’s has gone the other way.

Market participants attribute this to the US Outbound Investment Rules, which came into force on January 2.

The rules limit investments by US companies in sectors comprising semiconductors, AI, and quantum technologies in China. On top of prohibiting certain transactions, the regulations also require notification for others.

These have led “to a reduction in US investment in these sensitive Chinese technology sectors, thus shrinking the pool of capital available for large investment rounds in these areas,” Amy Yin, partner at law firm Reed Smith, tells The Business Times (BT).

See also: Shenzhen’s robot vision challenges Silicon Valley’s AI dream

No VCs in the room

Waiting for the boom cycle to return