VC funding in Chinese companies falls
Print Edition
INVESTMENT in Chinese companies backed by venture capital declined in the first quarter of 2016, a report has shown.
Economic concerns and a decline in global valuations have seen investors take a cautious, selective approach as the first three months of the year saw US$25.5 billion invested across 1,829 deals worldwide, down from US$27.7 billion and 1,907 deals in the fourth quarter of 2015, the report by accounting firm KPMG and consulting firm CB Insights showed.
While the number of deals in China rose slightly from 78 in the last three months of 2015 to 85 in the first quarter, investment in the same time frame fell 45 percent to US$4 billion, around 40 percent of the record US$10.2 billion set in the third quarter of 2015.
With most of the venture capital flowing to the service sector, a two-track economy is establishing itself in China — traditional industries adjusting to the realities of a slowdown while sectors focusing on higher-value activities, including services, technology, health care and education, were very optimistic, the report said.
The Chinese economy grew 6.7 percent in the first quarter year on year, with the service sector rising 7.6 percent, outpacing agricultural and industrial sectors and accounting for 56.9 percent of the overall economy, up 2 percentage points from a year earlier, official data showed.
“In the future, we expect to see more buyout activities and consolidation in China. We also expect to see a lot more corporates setting up VC arms to make venture-type investments in order to get in the game and follow the lead of companies like Baidu, Alibaba and Tencent,” said Lyndon Fung, a senior KPMG manager in China.
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