TLDR:
- China led global venture capital investments in the chip sector, totaling US$22.2 billion in 2023.
- State-backed investors are increasingly playing a role in private market funding in China.
China is dominating global venture capital investments in the semiconductor and AI sectors as part of the government’s push towards technological advancements. According to a report by Preqin, China contributed 90% of global venture capital investments in the chip sector last year, amounting to US$22.2 billion, doubling the previous year’s investment. This trend is largely fueled by partnerships between municipal authorities and state-backed investors like Sino IC Capital, with mega deals such as US$5.4 billion raised by Changxin Xinqiao Memory Technologies and US$4 billion by Hua Hong Grace Semiconductor.
Despite a slowdown in fundraising in the semiconductor sector in the first half of 2024, China still accounted for four of the world’s largest chip industry investments. State-backed investors have played a significant role in private market funding, participating in around 60 of the 100 largest deals from 2021 to June this year. In addition to semiconductors, AI and clean technology sectors also experienced large investments in China, with two of the world’s largest venture investment deals taking place in the country.
However, geopolitical tensions, high interest rates, and a lack of exit pathways have continued to deter private investments. Private firms in Greater China saw a 42% drop in fundraising in the first three months of the year compared to the previous quarter, indicating challenges in the investment landscape. Despite these obstacles, China’s focus on technology sectors aligned with its policy goals is driving significant venture capital investments and shaping the country’s innovation landscape.
