Chinese Start-Ups Attract Capital

Global investors put more money into Chinese start-ups in the third quarter, despite Beijing’s regulatory crackdown that has paused a rush of Chinese IPOs in the U.S. Venture capital investment in China rose in the July to September period from the prior quarter, bringing year-to-date totals to more than all of 2020. Investor interest came even as the quarter began with an onslaught of regulation from Beijing. Just days after Chinese ride-hailing app Didi ($DID@China) held its New York IPO on June 30, Beijing ordered the company to suspend new user registrations, resulting in a 35% drop. A ban on after-school tutoring companies affected the education sector, industry leaders like Tal Education ($TAL@China) down more than 90%. However, despite the crackdowns, since late July, China’s securities regulator has tried to calm foreign investors, explaining that China still needs foreign capital because in China’s agenda for how the economy and society will develop, capitalism is a very important tool. But if, throughout the process, the outcome is not as intended or if the outcome is undesirable in China, it will be cracked down on. Compared to those based in Europe or North America, Asia-based investors remained the most interested in China, actually increasing the number of China buyouts and venture capital deals in the third quarter.