PE-VC inflows from China fall 66%
Private equity and venture capital investments from China have dropped nearly 66 per cent so far this calendar year to $909 million from $2.69 billion in the corresponding period last year.
There was also a concomitant fall in the number of deals to 30 till September 17, 2020, from 35 a year ago. A major chunk was venture capital investments, defined as investments in companies that are less than 10 years old.
According to the data from Venture Intelligence, of the 30 deals reported in the period under consideration, 24 were VC investments and totalled $216 million. Last year, VCS accounted for 30 of the 35 deals recorded between January and September 17, 2019, and pumped in $446 million. For Chinese investors, the key bets were in non-banking financial companies, wealth management firms, banks, food delivery and e-commerce firms.
Arun Natarajan, founder of Venture Intelligence, said the drop was the result of the change in foreign direct investment (FDI) rules, which was amplified by the border standoff between India and China.
This can be seen in the fact that China was the third highest source of PE/VC investments in 2019, but it has fallen to the sixth spot in 2020. Natarajan felt investments, especially from China, would likely to reduce further.
Start-ups will likely feel the pinch the most, as Chinese investors are seen not only as alternatives to Us-based funds, but also bring additional value as strategic investors, he said.