China VC slump is set to drag Asia-Pacific fundraising down to a decade low

by | Jul 27, 2023 | Financial

Jason Lee | ReutersBEIJING — China-focused venture capital and other private investment funds have had a slow start to the year and are set to drag down Asia-Pacific fundraising to the lowest in 10 years.That’s according to a second-quarter update Thursday from Preqin, an alternative assets research firm. Alternative assets include venture capital, but not publicly traded stocks and bonds.”Given the ongoing economic uncertainties and geopolitical tensions related to China, investors continue to maintain a cautious stance,” Angela Lai, vice president and head of APAC and valuations, research insights, at Preqin, said in a statement.”We currently don’t see investors returning in large numbers to add allocations specifically to the China market.”China’s economic rebound from the pandemic has slowed in recent months. Challenges for the venture capital world go back further.The fallout around Didi’s U.S. initial public offering in the summer of 2021 and increased regulatory scrutiny from the U.S. and China paused what was once a thriving international investment trend.The U.S. is also considering restrictions on investment in the most advanced Chinese technology.China-focused venture capital funds raised $2.7 billion in the second quarter, a drop of more than 50% from the first quarter, Preqin said. That dragged down overall VC fundraising in Asia-Pacific to $4.5 billion in the second quarter, the lowest in at least five years, the report said.”Any time you add an additional element of regulatory risk, or the government may shift gears and change course, you’re adding more risk to the equation than the average venture capitalist wants to take,” said Andrew J. Sherman, Washington, D.C.-based partner at Brown Rudnick.Still, “no sophisticated U.S. investor thinks they can make all their money just investing in the U.S.,” he said, noting firms are still looking for opportunities in China and India to maximize returns.Preqin’s analysts still see “China’s economy as holding the key to a full recovery” in Asia-Pacific …

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