Domestic focus fueling VC market in China

HONG KONG, Jan. 28, 2021 /PRNewswire/ Venture Capital (VC) investment in Asia continued to rebound in Q4 2020, primarily driven by a continued surge in investment in China.

Chinese companies accounted for nine out of the top ten largest VC deals in Asia Pacific, including the top five mega-deals recorded globally for that quarter, according to KPMG analysis.

KPMG’s Venture Pulse Q4 2020 report finds that VC investment in China rose to an eight-quarter high amounting to USD 19.8 billion across 869 deals, up from 830 deals totaling USD 14.9 billion in Q3’20.

The top five deals in the world were all done in China, including a USD 1.7 billion raise by truck-hailing company Manbang Group; a USD 1.6 billion raise by Zuoyebang and a USD 1 billion raise by Yuanfudao, both in the edtech sector; a USD 907.1 million raise by Internet retail company Yunwang Wandian; and a USD 735.85 million raise by Automotive company Enovate Motors. VC investment across Asia-Pacific remained strong, rising slightly from USD 21.1 billion in Q3’20 across 1,285 deals to USD 25.2 billion across 1,398 deals in Q4’20.

Egidio Zarrella, Partner, Clients and Innovation, KPMG China, says: “Looking ahead to Q1’21, the outlook for VC investment in China is quite optimistic given the increasing focus on domestic investment and growth. Hot sectors will likely continue to be things like transportation and logistics, automotive, edtech, and health and biotech. We may also start to see increasing investments in different green technologies – not only in China, but across Asia.”

VC investment in China was very strong in Q4’20 as VC investors focused heavily on domestic opportunities.

Mature technology companies in China have also enhanced their focus on domestic and regional opportunities, both in terms of their expansion efforts and exit plans.

Philip Ng, Partner, Head of Technology, KPMG China, says: “Given some geopolitical tensions, many VC investors and corporates in China focused on making domestic and regional investments during Q4’20. There is also an increasing focus on improving the sustainability of the supply chain in technology and related sectors – investments towards the development of underlying deep-tech areas like chipsets, sensors, 5G, AI and databases etc. It is expected that, over time, these investments will help fuel ongoing innovation in the country.”

Biotech continued to gain traction among VC investors in China, with a number of companies raising USD 100 million+ in funding rounds in Q4’20, including LianBio, which raised USD 310 million to support its efforts to expand access to novel therapeutics in the region, and RecBio, which raised USD 224 million to support its development of genetically engineered vaccines, including a COVID-19 vaccine.

Healthcare and biotech were also big winners in the IPO market in Asia during the quarter. JD Health held the largest healthcare IPO seen in Asia, raising USD 3.5 billion on the Hong Kong Stock Exchange (SEHK).

The SEHK also hosted one of the world’s largest biotech IPOs of the year when China-based biotech RemeGen raised USD 515 million during the period.

Healthcare and biotech are expected to remain very hot areas of investment, in addition to edtech, logistics and marketplace platforms.

Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China, says: “On the investment front, healthcare continues to be a very strong area of investment in mainland China and Hong Kong. Many companies are attracting investments, from diagnostics and medical equipment to biotech companies focused on vaccine development and therapeutics. IPOs in this space were also strong in Hong Kong – a trend we expect to continue well into 2021 given the solid deals pipeline.”


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