Why should we be upbeat about Chinese unicorn growth?

Editor's note: Lu Jianfei, a special commentator on current affairs for CGTN, is a senior consultant at State Grid Energy Research Institute and specializes in energy, state-owned enterprise reform and corporate governance. She holds a doctorate in management from Renmin University of China. The article reflects the author’s opinions and not necessarily the views of CGTN.

The growth of China's unicorn firms has once again been thrust into the spotlight as the government work report, submitted on March 5 to the National Legislature for deliberation, proposes to advance the tiered development of innovative enterprises, promote the growth of small and medium-sized enterprises (SMEs) that use specialized and sophisticated technologies to produce novel and unique products and support the development of unicorn and gazelle companies in 2025.

A unicorn company, defined as a privately held startup with a valuation exceeding $1 billion and not yet listed on a public exchange, serves as a critical indicator of a nation's innovative capacity.

According to the 2024 Global Unicorn Index released by the Hurun Research Institute, China ranks second globally with 340 unicorns, trailing only the United States. Based on an analysis of the Global Unicorn Index during the last six years (2019-2024), the development of Chinese unicorn companies reveals the following trends.

From the perspective of quantity, the annual growth rate of Chinese unicorns averaged 8.3 percent, below the global average of 14.9 percent. China added an average of 28 unicorns annually, compared to the global annual average of 216. But notably, state-owned unicorns have surged, rising from fewer than nine in 2020 to over 20 in 2024. These enterprises play a pivotal role in addressing structural bottlenecks and reinforcing industrial security within China's supply chain ecosystem.

From the perspective of valuation, the average valuation growth rate of unicorn companies in China stands at 19.3 percent, slightly outperforming the global average of 18.3 percent. On top of this, China leads in unicorns going public, with 18 of the 29 unicorns that went public in 2024, far ahead of the United States with five and the rest of the world with six.

It's worth mentioning that a large number of potential unicorn companies, such as "single champions" and "little giants," referring to enterprises specializing in niche sectors, have chosen suitable sectors to go public. These companies should no longer be confined by the traditional definition of unicorn companies, which has to some extent affected the number of Chinese unicorn companies.

For instance, China's Science and Technology Innovation Board (STAR Market) reached 581 listed companies as of the end of 2024, with a total market value exceeding 6.34 trillion Chinese yuan (about $881.9 billion). Among these, 370 companies meet the unicorn valuation threshold, each exceeding $1 billion. These figures make a compelling case for China's robust unicorn cultivation framework.

From the perspective of industry, artificial intelligence (AI), semiconductors and green energy are the three dominant sectors for Chinese unicorns. Among them, the AI sector has witnessed especially rapid development in unicorns. Compared to 18 in 2019, Chinese AI unicorn enterprises rose to 37 in 2024, accounting for 40 percent of global AI unicorn enterprises.

The number of AI companies in China has surpassed 4,500, with the value of the core sector reaching nearly 600 billion yuan as of June 2024, according to the Ministry of Industry and Information Technology of China. Through proactive policy guidance and continued efforts by companies, generative AI has been widely applied in content creation, business operations, technological research and industrial production, among many other fields.

Nevertheless, Chinese unicorn companies still face challenges, such as increasing difficulty in obtaining financing, a slow incubation rate and reduced technical exchanges due to technological blockades, which hinder sustained and rapid innovation.

In this case, prioritizing resource allocation and policy enhancements could serve as China's playbook for the country to bolster unicorn growth. The government should focus on establishing specialized service-oriented institutions dedicated to fostering innovation among small enterprises, thereby building a robust service system for SMEs and facilitating the incubation of unicorns.

Furthermore, it is imperative to leverage the capabilities of state-owned capital investment companies, industrial funds from central state-owned enterprises and venture capital funds in areas such as capital investment and mergers and acquisitions. Encouraging strategic investments and acquisitions targeting unicorn enterprises will also foster new opportunities for the cultivation and development of this emerging sector.

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