US venture capital firm Eight Roads is planning to sell its stakes in about 40 China-based tech startups, according to a report from Bloomberg.

The firm, which is backed by Fidelity Ventures, has invested about US$1.1 billion in 130 Chinese companies, including well-known names like Alibaba and Pony.ai.

The divestment is occurring as geopolitical tensions and China’s slowing economy lead some global investors to reduce their presence in the region.

The stakes are expected to be sold at discounts of 60% to 80% from their peak valuation, which was around US$1 billion.

Eight Roads has not publicly commented on this situation.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s venture capital landscape shifts from foreign to domestic dominance

The retreat of Eight Roads reflects a broader transformation in China’s funding ecosystem that has been years in the making.

In 2024, only $1.4 billion of China-focused venture capital funds were raised in US dollars, down dramatically from $17.5 billion in 2022, while RMB-denominated funds now account for 84% of all China-focused venture capital 1.

This shift began as early as 2007 when private equity and venture capital funds increasingly started registering as Renminbi (RMB) funds in China 2.

The trend accelerated in recent years, with yuan-domiciled funds deploying over 500 billion yuan ($69.6 billion) in 2023, outpacing US dollar funds by 5.4 times according to Zero2IPO Group data.

Foreign investors face additional hurdles that domestic funds don’t, including longer approval processes and minimum capital commitments of US$5-10 million for establishing foreign-invested RMB funds 2.

This capital redistribution is reshaping China’s innovation landscape, with domestic funds potentially favoring different sectors and investment timelines than their foreign counterparts.

2️⃣ Beijing’s strategic response to foreign capital flight

As international investors retreat, China is systematically filling the funding gap with government-backed capital and policy initiatives.