Chinese VC investments surge with government’s encouragement

The Chinese government’s efforts to encourage venture backing of entrepreneurship appear to be paying off, at least according to an overview released in May by the data analysis firm Preqin of recent global VC trends.

Four of the five largest venture funds worldwide in market as of April 2017 are focused on China. The largest of these, the China State-Owned Capital Venture Investment Fund, based in Shenzhen, aims to become the largest venture capital fund ever, targeting 200 billion yuan or $29 billion. It will invest in innovation in state-owned enterprises and industrial upgrades.

Three other Chinese funds in the top five are targeting between $3 billion and $7.5 billion each, according to the report.

U.S.-based New Enterprise Associates is targeting $3 billion for Fund 16.

Massive funds like those help explain why venture funds in Asia-focused markets are collectively seeking the most capital of any region, despite accounting for less than 20 percent of the number of funds, the report says. Worldwide, a record 995 funds are seeking an aggregate $132 billion. Only 193 of those funds are in Asia, but together they are seeking $62 billion.

The numbers reflect a shift in Chinese government policy. In September, the country’s State Council urged government-led funds and companies to invest in private startups.

And there’s little sign of the Chinese cash flow letting up in the near future. On May 16, after the time period analyzed in the Preqin data, the state-owned China Aerospace Science and Technology Corporation announced along with other government-owned companies that it’s launching a 150 billion yuan, or $21.77 billion, fund to invest in such industries as aerospace, clean energy and high-speed rail.

The 2016 trend of venture activity shifting from North America to greater China has continued thus far into 2017, the Preqin data shows.

As of April, China has seen 482 financings, more than double its historical average, while North America has seen 1,105, which is below its historical average.

In terms of aggregate deal value, however, China still trails North America at $11 billion compared to $18 billion. Whether that will hold true for the rest of 2017 remains to be seen.

Action Item: The read the full Preqin report, visit here http://bit.ly/2r8Mz6y

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