TLDR:
- China’s AI startup sector hindered by lack of venture capital due to various reasons including regulations and conservative government approach.
- US containment strategy restricting flow of critical technologies and venture capital into China leading to decline in deals for Chinese startups involving US investors.
Technology specialist Yin Ruizhi highlights the challenges faced by China’s AI startups, emphasizing the lack of venture capital as a major obstacle. Traditionally, China has absorbed significant amounts of venture capital, largely from the US, but this trend has declined sharply in recent years due to US containment measures. The impact of this shift is evident in statistics showing a dramatic drop in deals for Chinese startups with US investors, signaling a significant decrease in dollar-dominated venture capital in China.
Both private and state-owned capital in China remain substantial but tend to shy away from investing in disruptive innovation applications, particularly in the AI sector. State-owned capital is policy-oriented and focuses on technologies critical for overcoming US restrictions, which do not align with funding disruptive innovations. Similarly, private capital in China lacks motivation to support large AI models and prefers to invest in safer, less risky ventures with clearer applications.
Companies with disruptive innovation applications, like large AI models, face challenges in the Chinese stock market due to profitability requirements and unclear profit models in the initial stages. As a result, many Chinese AI teams opt to seek growth opportunities overseas where they can access funding and support for their innovative projects. The lack of venture capital in China further stifles the country’s ability to support cutting-edge technologies and hinders the development of disruptive innovation applications.
