Foreign VC investment in China plummets 68% in 2022

Firms in the Greater China region – which includes mainland China, Hong Kong, Macao, and Taiwan – received 765 deals from non-Chinese investors in 2022, marking a 32% drop from the previous year, according to a recent report by PitchBook.

The total deal value recorded a 68% decline over the same period, reaching its lowest point since at least 2015.

These results can be attributed to various challenges faced by the Chinese VC market, including IPO restrictions and government intervention in prominent tech companies, which have increased perceived risks for foreign investors.

The downward trend is also apparent this year. In the first half of 2023, Greater China generated US$4.4 billion across 264 foreign investment deals, representing only 10% of all VC deals in the region. In 2018, foreign investment contributed around 16% to total VC deals in China, the highest since 2015.

According to the report, foreign investors find that the absence of dedicated local investment teams makes it challenging to establish a presence in the Chinese market.

Moreover, the report revealed that only 3.2% of completed deals this year have involved US investors. Tensions between the two countries have dominated recent discussions on foreign investment in China as well.

Last month, US President Joe Biden signed an executive order restricting American VC firms from investing in Chinese startups operating in certain areas.

When including deals from Chinese investors, total VC investment value in Greater China dropped by 46% year on year to US$77.8 billion in 2022, while the number of deals declined slightly to 7,610.

The region also generated 31% less value through IPOs in 2022, although the exit count increased by 8% compared to the previous year.

See also: The US-China tech rift’s surprising beneficiary: Southeast Asia