VC’s Sour on China — Funding Down 44%

Venture funds are giving up on China. Funding has fallen 44% this year amid a government crackdown on tech.

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From a report out overnight in Bloomberg:

Venture capital investments in China are falling sharply this year, making it one of the worst-performing countries globally after the Communist Party’s crackdown and an overall decline in tech valuations.

The value of venture capital deals in the country tumbled 44% to $62.1 billion through October, compared with the same period in 2021, according to research firm Preqin.

…China is among the worst performers, with a venture investment drop that is worse than the global decline and the pullback in the US. 

The US has fared considerably better than China. Venture funding is down just 27% in the first three quarters compared to the same period in 2021, according to CB Insights.

The Communist party has cracked down on numerous Chinese tech companies. This has crushed the stocks of companies like Alibaba and DiDi Global.

As if that wasn’t enough, neverending Covid lockdowns have taken a toll on the economy. From Bloomberg:

China’s venture landscape has been aggravated by the Communist Party’s harsh Covid Zero policy. Lockdowns in cities like Shanghai and Zhengzhou have hampered all manner of business, from advertising and investments to the production of Tesla Inc. automobiles and Apple Inc. iPhones.

Some VC’s are hiding out in semiconductors. The government currently favors the industry as a strategic priority.

That’s all well and good until Xi Jinping decides foreigners shouldn’t own assets critical for national security. Then, venture fund go bye-bye.

Investors getting involved with China are playing with fire. It is a brutal dictatorship with no respect for human rights or the rule of law.

We should invest in places like the US, Europe and Japan. Democracies that take property rights seriously are a much better place to do business.

Would you invest in China? Leave a comment at the bottom and let me know!

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