China Nominal GDP: $17.8 trillion (2023)
China M&A market 2024: $277 billion. Another source puts ~$300 billion. In 2016/2017 - $750 billion +
China Private Equity: $121 billion (across 1,041 deals in 2024)
China VC: $2.3 billion (across 6,125 transactions in 2024)
Another Source: A top global market in terms of VC investments, with over US$80 billion invested. (Over time).
Following is the build of $277 billion M&A. This includes PE and VC
Later - Here above VC deals refers to deal value of less than US$10 million but invested by financial buyers. Private Equity are larger than $10 million.
But as we read through, one thing that emerges is that there is a lot of Corporate VC in China, which perhaps is counted above as M&A or perhaps is not counted at all in above table.
Because certain sources put the value of VC investments in China at $20 billion in 2024
In terms of other Asian countries, Singapore attracted $ 4.9 billion of VC investment in 2024, and Israel $3.1 billion.
Here for example, is January 2025 China VC space:
Quick comparison with US:
US GDP: $27.7 trillion
US M&A: "In 2024, the United States saw 17,430 M&A deals with a total value of $1.6 trillion, though the peak in M&A activity and value was reached in 2021."
US Private Equity: "In 2024 aggregate expected U.S. private equity deal volume of $838.5 billion represented a 19.3 percent increase over 2023 deal volume of $703.0 billion"
US VC investments: "In 2024, US venture capital (VC) funding surged to $148.8 billion, a 34.6% increase year-over-year, despite a decline in deal volume to 4,801 deals, down 28% from 2023."
The comparison is stark. For example, following is just one month in US VC investments:
Before diving in to VC activity in China, here are a few interesting charts about PE and VC sectors, and then the return breakdown of PE deals:
----
About China VC market:
- A top global market in terms of VC investments, with over US$80 billion invested
- China has its own Internet ecosystem, one not dominated by Google, Facebook, Amazon etc.
- High tech, industrial, AI deals drive the investments
Perhaps here, this chart on innovation:
China is at no. 11, one of the few countries outside US and Europe.
Following chart gives an indication of the startup ecosystem in China:
Following is the key companies from different cities of China:
AI Startups
Following is an indication of AI related start-ups: In terms of funding, the U.S. is massively ahead, with private AI investment totaling $335 billion between 2013 to 2023. AI startups in China raised $104 billion over the same timeframe, while those in the UK raised $22 billion.
Space Startups
And following shows the map of investment in space start-ups. The value though is ~30% of China's investment in AI in this period, still China is just next to US in terms of investment in that space.
Robotics Startups
An analysis of GlobalData’s Deals Database revealed that a total of 5,983 VC were announced in the robotics space globally during 2018-2024 with the US leading the charge with 2,028 deals followed by China followed 1,532 deals. This translates to a combined market share of 60% of the global deal volume, underscoring their pivotal roles in the robotics ecosystem.Meanwhile, the total VC funding in the robotics space stood at $100.9 billion during 2018-2024 with the US seeing announcement of $49.9 billion worth of deals and China attracting investments worth of $24.4 billion. This translates to a combined market share of around 75% of the global deal value.
--
Following are the world's most valuable unicorns. The top company is from China.
Here, follows compares the startups unicorns in Asia:
The above chart talks about private companies. In terms of public companies, following shows the key Chinese companies in top 100 in terms of revenue. (While comparing revenue for consumer companies, one needs to generally keep in mind the PPP factor - volume at the same dollar value will be higher in lower PPP countries compared to say US companies).
Further to understand the ecosystem better:
"This boom is the result of five converging factors: (1) supportive government policies, (2) maturing of innovation ecosystems, (3) accumulation of a critical mass of knowledge in some sectors, (4) an expanding consumer class, and (5) new technologies and business models with transformative potential.Whether domestic or foreign, corporates want to engage with startups in China for many reasons: gaining access to technologies and innovation, cultivating new ecosystems, accelerating growth through external capacity and knowhow, creating startup spinoffs, amplifying an investment by accessing external resources, setting the standard in an emerging area, and becoming the preferred supplier of emerging giants. " (From 2019)
The Chinese government views ‘mass entrepreneurship’ as the next stage of the country’s reform and opening up, and has introduced multiple preferential policies to encourage and support startups. On the macro level, economic growth is increasingly driven by services and consumption, rather than manufacturing and construction.Investment network of the leading corporate stakeholders in the Chinese start-up landscape. The size of a bubble indicates the number of investments deals. Each link represents one or more investments. Note that the network does not show current ownership, since it does not take into account divestments or mergers.
While China’s ‘Galapagos-style’ ecosystem helps Chinese companies beat their foreign competitors in their own market, it makes it difficult for them to succeed overseas and to attract the global talent needed to fuel world-class innovation.The majority of Chinese unicorns are backed by Tencent, Alibaba, Lenovo, Fosun, Baidu, JD, Xiaomi, Qihoo 360, and TCL: these networks are represented in the figure above. The vision, infrastructure, and deep pockets of the Chinese tech giants are important forces shaping the evolution of the Chinese startup landscape.
Government policies that indirectly impact entrepreneurship in China can be divided into three clusters based on their goals:(1) accelerating the rate of scientific and technological achievements;(2) promoting transformation and upgrading of industries; and(3) bridging academic research and real-world applications.Similarly, policies that directly impact entrepreneurship can be categorised into three clusters based on their goals:(1) improving the institutional mechanisms to facilitate entrepreneurship;(2) improving incentives and financing for entrepreneurs; and(3) fostering talent and inspiring entrepreneurship.The government uses seven methods to achieve these objectives:(1) direct funding and investment;(2) tax incentives;(3) financial policies;(4) educational guidelines;(5) entrepreneurship infrastructure development;(6) law-making; and(7) authority and power over personnel appointments. (!)
The case for China is strong: outside of the US, China is the clearest investment opportunity for foreign investors in terms of potential scale and growth. With a population of over 1.38 billion people, China is a market where ‘popular’ takes on an entirely different meaning: the top 5 apps each have more monthly mobile users (500 million and more) than 99% of the world’s countries do in population. In 2018, the number of mobile internet users surpassed 800 million. For investors, whether in transportation or logistics, fintech or biotech, China’s startup scene is exceptional in every way.
Lee highlighted this as a positive lesson in entrepreneurship: “[T]his year I see more pragmatic entrepreneurs who are getting better [in their] knowledge of entrepreneurship. Instead of amassing a big user base for a higher valuation, they are spending more time on how to maintain users, how to bring more value to them and solve their real problems. These are the growths that a capital winter brings to Chinese entrepreneurs.” From our future-focused perspective, as capital becomes more challenging to source, entrepreneurs will be incentivized to focus on value creation. This mindset shift has – and will continue to – lead to better business models, a more resilient startup ecosystem, and potentially, improved outcomes in innovation.
Chinese tech giants are not just active in China, they are operating in SEA too:
---
And here following is an interesting infographic talking about the Innovation space in China:
In terms of example deals, here are 4 large deals from 2024: from AI, to Electric Vehicles, to semi-conductor products.
--
A few recent changes making China more investor-friendly
China’s efforts to open its capital markets are enhancing opportunities for foreign investors. The country has implemented new measures to make the A-share market more accessible by lowering shareholding thresholds, reducing lock-up periods, and expanding investment routes. These reforms, effective December 2024, aim to attract a wider range of international investors, particularly in strategic sectors like green energy, high-tech manufacturing, and digital commerce.
In another significant step to attract foreign investment, China has fully opened its manufacturing sector to international capital. The latest update to the national negative list for foreign investment, which came into effect in November 2024, has removed all restrictions on foreign investment in manufacturing. This move follows earlier progress in China’s free trade zones, which had already implemented zero-restriction policies in this area in 2021. As a result, almost all sectors of China’s manufacturing industry are now open to foreign investors, making it one of the most competitive and globally integrated sectors.
--
"China has been the world’s largest manufacturer for over a decade and continues to drive growth in high-tech manufacturing, such as medical equipment and computer sectors."
A few sectors where China sees a lot of activity in start-up space:
Artificial intelligence (AI) and machine learning
The market potential for AI and machine learning in China is staggering. The AI sector is projected to grow from US$34.2 billion in 2024 to US$154.8 billion by 2030, with machine learning showing an even higher growth trajectory. These developments are underpinned by significant demand in sub-sectors like robotics, generative AI, and healthcare applications. Remote patient monitoring, telemedicine, and precision diagnostics exemplify the practical impact of these technologies, addressing challenges such as aging demographics and rising healthcare costs.For foreign investors, China presents both opportunities and challenges in this domain. Areas like research collaborations, localization of AI solutions, and export of advanced technologies offer lucrative entry points. However, success requires a nuanced understanding of local regulations, consumer preferences, and market dynamics. Investors must also navigate issues related to data security and intellectual property, ensuring alignment with China’s unique operational environment.
Electric Vehicles and new energy
China’s electric vehicle (EV) and broader new energy industries stand as pillars of its economic strategy and global competitiveness, presenting significant opportunities for investors in 2025 and beyond. As the world’s largest NEV market, China boasts a fleet of over 13.1 million NEVs as of 2022, with electric vehicles comprising nearly 80 percent of the total. In 2023 alone, production and sales of NEVs exceeded 9.5 million units, reflecting annual growth rates of over 35 percent. Tesla’s Shanghai gigafactory produced 947,000 vehicles in 2023, while BMW and Volkswagen announced multi-billion-dollar investments to enhance EV production and innovation in China.
(Things perhaps change with the new global tariff discussions)
Health & Wellness
China’s health and wellness market is on track for significant expansion in 2025, driven by evolving consumer preferences, advancements in technology, and supportive economic policies. Valued at US$683 billion as of 2024, the market is characterized by a blend of traditional and modern approaches to well-being, offering substantial opportunities for businesses and investors alike.
The integration of technology continues to transform the market. Home fitness platforms and smart devices have gained widespread popularity, reflecting the increasing desire for accessible, flexible solutions. By 2025, revenues from fitness apps alone are expected to grow significantly, buoyed by millions of paid subscribers. Similarly, mental health tools, such as meditation apps and virtual therapy platforms, are gaining traction as consumers prioritize emotional well-being.In a notable development, China has taken significant steps to open its healthcare sector to foreign investment, offering new opportunities for global stakeholders. The government’s recent decision to permit wholly foreign-owned hospitals in nine major cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, reflects a commitment to modernizing the sector and meeting the evolving healthcare needs of its population.
Aerospace & Satellite Technology
The China Aerospace sector is poised for significant expansion in 2025, driven by substantial government investments, technological advancements, and an increasing focus on national defense and space exploration. With a defense budget of approximately US$230 billion for 2024, China continues to prioritize the development of advanced military aircraft, missile systems, and satellite communications, positioning itself as a global leader in aerospace technology.
Virtual Reality & Augmented Reality
The AR & VR market in China is experiencing rapid growth, projected to reach US$8.2 billion in 2024 and grow at a CAGR of 8.72 percent through 2029, reaching US$12.4 billion. The largest segment is VR hardware, expected to generate US$2.9 billion in 2024. By 2029, the number of users in China is anticipated to reach 1.1 billion, with a user penetration of 77.4 percent in 2024, increasing to 79.6 percent by 2029. The average revenue per user (ARPU) is expected to be US$7.3. This growth is driven by strong consumer demand for immersive experiences, especially among younger generations in gaming, entertainment, and social media.
The other space for further exploring is China and Robotics. China is one of the leading players for industrial robots. And for humanoid robots too, 56% of supply chain companies are based in China.
But China still needs to achieve a breakthrough in “core technologies,” such as processor chips, high-precision sensor and robot operating systems, to reduce its reliance on foreign technology, said Zhang Dan, chair professor of intelligent robotics and automation at the Hong Kong Polytechnic University.
..
Beijing excels in building “Brains”; whereas the Pearl River Delta and Yangtze River Delta have many giants and hidden champions in motors and sensors, especially covering key components such as servo motors, reducers, and controllers, giving them more advantages in “Body” and “Integration.”
Although the statistics on the scale of the robot industry vary in different regions, through rough estimates, the industrial scale in Shenzhen, Shanghai, Guangzhou, and Suzhou is in the first tier, with Beijing, Changzhou, Wuhu, Nanjing, and Hangzhou in the second tier, and Ningbo and Dongguan in the third tier.
No comments:
Post a Comment