Despite Big Tech Regulations... Last Year, China's Venture Capital Investment Hits Record High of 156 Trillion Won

China Venture Capital Investment Scale Trends [Image Source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] Despite the Chinese authorities' big tech regulations last year, the scale of venture capital investment in China reached a record high of $130.6 billion (approximately 156.63 trillion KRW), Bloomberg reported on the 9th (local time), citing financial information firm Preqin.

Last year's investment scale was the largest ever, increasing by more than 50% from $86.7 billion in 2020 and surpassing the previous record of $115.2 billion set in 2018.

Although the stock prices of leading Chinese big tech companies such as Alibaba, Tencent, ByteDance, and Didi Chuxing have significantly declined over the past few months, this is seen as evidence that the enthusiasm for investment in advanced technology industries has not cooled.

Jiang Jingjing, legal advisor at Hong Kong law firm King & Wood Mallesons, said, "Investor preference for Chinese technology companies remains valid," adding, "Only the investment targets have changed, with increasing amounts of capital flowing into startups with cutting-edge technology."

Compared to the United States, it is still far behind. The scale of venture capital investment in the U.S. last year was $296.6 billion, more than double that of China.

However, when looking at detailed investment scales, there are several industries where China attracted more investment than the U.S. The semiconductor sector is a representative example.

Last year, the investment attracted by China's semiconductor industry was $8.8 billion, six times that of the U.S. at $1.3 billion.

This is because the Chinese government has declared its ambition to become a semiconductor powerhouse and is actively fostering the semiconductor industry. In 2016, the investment scale in the semiconductor industry was $600 million in China and $200 million in the U.S., with China having three times more, but the gap has been widening.

Investment related to biotechnology also surged from $2 billion in 2016 to $14.1 billion last year.

In March last year, China announced a five-year economic development plan, pledging to increase national research and development expenditure by more than 7% annually.

Alicia Garcia-Herrero, economist at investment bank Natixis, said, "The Chinese government is well aware that innovation is crucial for China's future," adding, "They see investment in high-tech sectors as absolutely essential, especially to reduce overdependence on capital-intensive industries and to mitigate the impact of aging."

However, there are also criticisms that the results of large-scale investments are still minimal. Tsinghua Unigroup, a semiconductor design and manufacturing company heavily supported by the Chinese government, went bankrupt in July last year, and the Wall Street Journal reported on the 9th that at least six new large-scale semiconductor manufacturing projects in China have failed over the past three years. The WSJ explained that the amount invested in these six projects was at least $2.3 billion, most of which was government-supported funding.

This content was produced with the assistance of AI translation services.