• SSTI's 2019 Annual Conference - September 9th-11th in Providence, RI

    SSTI and conference host Rhode Island Commerce Corporation invite you to join your peers for conversations around emerging challenges and opportunities related to science, tech, innovation & entrepreneurship.

  • Become an SSTI Member

    As the most comprehensive resource available for those involved in technology-based economic development, SSTI offers the services that are needed to help build tech-based economies.  Learn more about membership...

  • Subscribe to the SSTI Weekly Digest

    Each week, the SSTI Weekly Digest delivers the latest breaking news and expert analysis of critical issues affecting the tech-based economic development community. Subscribe today!

Chinese VC market continues rapid ascent

April 04, 2019

While the overall Chinese economy may be facing a slowdown, the venture capital (VC) market continues to report strong growth and became the second largest VC market by total capital invested in 2018, according to a new report from PitchBook. The report, Venture Capital in China, highlights the growing prominence of Chinese startup capital with nearly 30 percent of global VC directed into Chinese startups in 2018. PitchBook analysts contend that the Chinese VC market should continue to increase in prominence as Chinese startups activity matures and more foreign and domestic investors look to benefit from the country’s massive market and rapid rates of innovation. 

Although the Chinese VC market dates back almost 30 years, this recent, rapid ascent in deal activity started in 2013 and PitchBook analysts contend it is the result of several major entrepreneurial initiatives undertaken by the Chinese government during the 1980s, 1990s, and 2000s. Efforts include a massive national technology incubator (Torch), seed funding (Innofund), and a series of funds-of-funds (FoFs) to develop the entrepreneurial and technological activity in China.

Launched in 1988, Torch – a government-funded initiative to foster entrepreneurship and technological innovation – became the cornerstone of the Chinese government’s efforts to build a vibrant S&T economy. Torch established high-tech innovation zones across the country with the purpose of centering resources, money and talent. The high-tech zones included: science and technology industrial parks; productivity promotion centers; and, technology business incubators.

In addition to government support for both entrepreneurship and technological innovation, several other factors also drive China’s rapid startup growth including:

  • China is home to the largest education system in the world and has seen steady growth in its educated population, with 7.4 million university graduates in 2017 alone;
  • For years, China has produced more STEM graduates than all western countries combined;
  • Provincial and local Chinese governments have experimented with preferential tax treatments that encourage both foreign and domestic VCs to invest in startups in their districts;
  • In 2017, the national Chinese government announced preferential tax policies for VCs and angel investors;
  • Economic development in China has led to a sharp growth in the size of China’s middle class, rising from roughly 3 million in the 1990s to over 500 million in 2018; and,
  • An estimated 677 million Chinese citizens own smartphones, and the country is home to 802 million internet users (98 percent of which access it via mobile devices).
china, venture capital