Investment in China VC sector jumps to over US$50 bln in 2016

October 19, 2017 11:12
China and the United States have been seeing brisk activity in the venture capital sector in recent years. Photo: Reuters

China’s venture capital sector has become the second largest in the world. Last year the market saw investments worth more than US$50 billion (around HK$390 billion), expanding 10 times from just US$5 billion in 2007, according to reports from PitchBook and Zero2IPO.

The renminbi fund constituted the biggest chunk (75 percent) of the investment, amounting to nearly US$40 billion, followed by foreign investment and joint investment funds, the Hong Kong Economic Journal reports. That's a big jump from only 25 percent of VC activity in China 10 years ago.

By comparison, the VC market in the United States market saw investments of over US$40 billion in 2007 and 2008. But after the financial tsunami of 2009, the volume halved to less than US$20 billion, before rebounding again to nearly US$30 billion in 2010 and surpassing US$50 billion in 2016, the highest in 15 years.

China’s VC sector is blossoming mainly because of the support from its central government. Large enterprises holding a great deal of cash, individual investors with high net worth, and entrepreneurs who have quit the market have invested hugely in the country's VC market as well.

To satisfy the needs of the young middle class, many big startups have emerged, fueling the development of various areas of business, such as mobile payment and food and beverage delivery, and yielding enormous accomplishments.

The consumer market, in particular, has become a favorite among technology startups. An increasing number of Chinese startups are also venturing into foreign markets.

This article appeared in the Hong Kong Economic Journal on Oct. 18

Translation by Jonathan Chong

[Chinese version 中文版]

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