The largest venture capital investments in China are increasingly coming from technology sectors that align with government policy goals, such as artificial intelligence (AI) and semiconductors, despite a continued decline in overall funding, according to a new report.
China accounted for 90% of global venture capital investment in the semiconductor sector last year, totaling $22.2 billion, more than double the $9.5 billion expected to be invested in 2022, according to a report released Thursday by research firm Preqin.
Funding in China’s semiconductor sector appears to have slowed since then, with just $1.6 billion in 128 deals in the first half of this year, according to Preqin data, though China still accounted for four of the world’s 10 largest semiconductor industry investments during that period.
State investors are playing a growing role in China’s private market fundraising, with state investors participating in about 60 of the 100 largest deals from 2021 through June this year, double the number from 2017 to 2020, according to research firms.
Two other areas that China aims to grow and support as part of its broader economic policy – artificial intelligence and clean technology – also saw heavy investment this year, according to Preqin.
Overall, Chinese AI companies are set to raise $5.6 billion in the first half of 2024, roughly half of the $11.7 billion raised in the sector in the whole of last year, according to the firm.
However, geopolitical tensions, high interest rates and a lack of an exit route continue to discourage private investment.
Private companies in Greater China, which includes Hong Kong, Macau and Taiwan, raised $12.3 billion in the first three months of the year, down 42% from the previous quarter and a “much steeper drop” than the 12% drop globally, Preqin said.
