Venture-capital funding in China falls to pandemic-era lows in weak 2024 start, with AI, EVs, clean energy as exceptions

Total venture-capital investment in China in the first quarter fell 30 per cent quarter on quarter to US$11.5 billion

China still leads Asia’s VC landscape, with eight of the 10 biggest deals in the first three months of the year

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A worker assembles an SUV at a car plant of EV maker Li Auto in Changzhou, in eastern China’s Jiangsu province, on March 27, 2024. Photo: AP

Published: 5:00pm, 30 Apr 2024

Venture capital (VC) investment in China had a disappointing start to the year as overall investment fell to levels not seen since early in the Covid-19 pandemic, with the AI, electric vehicle (EV) and clean energy sectors among the few defying the gloom.

China continued to dominate Asia’s funding landscape in the first quarter, securing eight of the continent’s 10 biggest deals – most notably Moonshot AI’s blockbuster US$1 billion deal in February.

However, overall VC investment in the country fell 30 per cent quarter on quarter to US$11.5 billion, according to a report released on Tuesday by KPMG on the global VC market.

The figure, the lowest since the first quarter of 2020, was “striking”, according to the professional services firm, even after accounting for how the first quarter tends to be slow in China because of the Lunar New Year festive season and companies putting off big decisions until after the end of the financial year.

People attend a launch event for a commercial project using artificial intelligence in the mining industry in Jinan, Shandong province, China, on July 18, 2023. Photo: EPA-EFE

Globally, “market challenges – including the lack of exits, high interest rates, and continued geopolitical uncertainties – kept VC investors cautious”, the report said.

Investors were more selective about potential deals and extending bridge funding to their existing portfolio companies, it added, continuing a slump that lasted throughout 2023. VC deals in China last year totalled US$42.6 billion, representing a 27.4 per cent year-on-year decline in value, according to a separate report by data analytics firm GlobalData released in January.