Venture capitalism in China is changing, but tech industries are adapting
Barry He
A view of Shenzhen, a high-tech hub in south China's Guangdong Province, October 12, 2020. /Xinhua

A view of Shenzhen, a high-tech hub in south China's Guangdong Province, October 12, 2020. /Xinhua

Editor's note: Barry He is a London-based freelance columnist. The article reflects the author's opinions and not necessarily the views of CGTN.

Venture capitalism in China now makes up 40 percent of the total venture capital invested globally. Up and coming start-ups promising to be the next unicorn are popping up globally at an exponential rate, but real concerns exist about how fruitful opportunities may be found in a post-COVID-19 world for domestic and foreign investors alike.

Navigating the Chinese market now as ever, requires skilled nuance, but China's technological boom will provide a welcome respite.

The traditional advice for those seeking to find success in Chinese markets would be competent business knowledge and a thorough comfort with the intricacies of legal and regulation hurdles, which may differ from their home markets. Many foreign start-ups complete this due diligence, but fail to gain traction in China, as domestic venture capital firms now more than ever typically expect international entities to hold their base of operations within the country itself. Many foreign start-ups fail to appease this concern, leading to an uncertain picture for investors who are no longer starstruck by big foreign brands, instead preferring to be impressed by lucid and tangible planning.

Gaining a foothold in one of the world's largest economies which has its own unique culture requires local integration at fundamental levels. Not too long ago, this was easily achieved through connecting and collaborating with local businesses and completing the right market research to get into the heads of Chinese customers. China has one of the world's largest networks of local start-up incubators, ripe to leverage and grow a network with, many of which benefit from generous government funding, especially within the areas of science and technology parks.

Nevertheless, benefiting from a mix of private and public funding depends on who you are. Many investors offer priority to domestic Chinese enterprises, and so international start-ups will need to define their position and marketing / exit strategies well before stepping into the East Asian market.

A 5G-supported remote driving system is demonstrated during the 2020 Smart China Expo Online in southwest China's Chongqing Municipality, September 15, 2020. /Xinhua

A 5G-supported remote driving system is demonstrated during the 2020 Smart China Expo Online in southwest China's Chongqing Municipality, September 15, 2020. /Xinhua

Across the world, investors are steadily becoming more and more risk-averse, and this trend is appearing in China too. Many industries remain bullish however, most notably fast-paced sectors which have thrived during COVID-19, such as e-commerce, healthcare, IT software and food delivery. China's appetite for such areas remains high, as the country continues to develop into a technological superpower at an amazing speed. China's human capital means that creative strokes of genius are happening frequently, and investors may expect to see this as a strong consolation for what is an otherwise unstable global future for investments. Innovation tends to find a rhythm with rapid and regular ideas kick starting many exciting opportunities.

Technology, a long-term friend to venture capitalists in China, will see a string of 5G-related investment opportunities as the country becomes one of the most next-gen mobile-tech-integrated countries in the entire world. Ranging from virtual reality applications to smart cities and self-driving vehicles, the landscape for venture capital in the next few years is a hypothetical gold mine.

What financial monsters which will emerge from Chinese tech incubators will no doubt propose significant positive changes to people's lives globally, meaning that both local production of products and exporting such innovation will provide future interest for VCs. 

The unpredictable investment landscape in both Asian and the wider world means new opportunities are afoot. Talent is becoming much more endemic to local domestic industries, being more mobile in the past. The rise in nationalism will make cross-border collaborations, innovation and financing difficult as many countries such as the U.S. will continue to struggle finding a balance between perceived national interest and free exchange of business.

Challenges facing the investment landscape for budding small business ideas have been nothing new to China however. For the past few decades, solutions have always revolved round open markets, shrewd regulation and support for private enterprises. The optimistic and can-do attitudes which have been an eternal personality trademark for investors will no doubt find new opportunities to come.

China's rapid economic ascent is unheard of in human history. As China's GDP per capita continues to increase, the nation's 1.4 billion strong population will exponentially lead to new ambitious levels of individual creative output. It is a societal responsibility for investors to facilitate this and allow society to reach the next level.

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