PE and VC fund managers deserve sympathy at this time, having raised so much money recently only to be blindsided by Chinese policy shifts, as this Reuters article points out. But to continue throwing good money after bad is unconscionable. It would be far better to wait, watch and learn from what is going on at the moment in both Washington and Beijing.
Investing at this level in China has become next to impossible, if for no other reason than public exit strategies are likely to be held hostage by either or both of the US and Chinese governments as their trade war morphs into a financial war. Nevertheless, three strategies seem to have emerged as the consensus: 1) Invest in the government’s priorities; 2) Invest in domestic-focused firms; and 3) Brush up on Xi Jinping Thought.
Each begs rebuttal: 1) Investing in the Chinese government’s priorities is akin to investing in future victims of the US-China conflict; 2) Investing in domestic-focused firms is no assurance of avoiding US Entity Lists; and 3) Xi Jinping Thought is mass-market propaganda that is useless to read in isolation from the broader context of Chinese history.
Now is the time to keep the powder dry. There is further carnage ahead, believe it. This is especially for funds investing in the GBA from their offshore base in Hong Kong.
Continue reading PE, VC money should be in less of a hurry
Shenzhen Capital Group has just celebrated its 20th anniversary. With RMB347.2 billion of funds under management, the state-owned company, which comprises a diverse range of fund types, can boast a pretty impressive track record:
- Invested RMB45.2 billion in 1,016 portfolio companies;
- 151 of which have gone on to list on 16 capital markets worldwide;
- Accounts for 12.4% of the value of all companies listed on A-share ChiNext;
- Compound annual growth rate of 20%.
Continue reading Shenzhen Capital turns 20
Shenzhen Capital Group, a state-owned venture capital firm, announcedlast week that the company has launched its debut healthcare fund to raise over RMB2 billion (US$291 million).
The target amount of the first round of fundraising is RMB800 million ($116 million). The debut healthcare fund – Shenzhen Hongtu Healthcare Private Equity Fund – has already secured capital commitments from state-owned Shenzhen City Guidance Fund Investment, PingAn Real Estate Investment, ICBC, Chinese private equity firm Before Capital, and Kunpeng Capital.
Continue reading Shenzhen Capital Group debuts US$291m healthcare fund
HSBC is launching a GBA+ Technology Fund to focus on lending to high-growth companies in the Greater Bay Area in a variety of sectors, including e-commerce, fintech, robotics, biotech and health care technology, reports SCMP.
The fund would allow growth and technology companies who have received a round or two of funding from venture capital or private equity firms to access senior debt financing. HSBC will not take equity as part of the financing, according to the company.
Beijing-based venture capital firm Sinovation Ventures, led by the renowned Lee Kai-fu, has chosen Guangzhou to establish its Greater Bay Area headquarters, reports Global Times.
The firm, which invests heavily in various fields related to artificial intelligence (AI), also unveiled a new AI research institute for the Greater Bay Area. This was after disclosing that it had closed its third yuan-denominated fund of RMB2.5 billion ($361.78 million). Pertaining mostly to Guangzhou, the fund will primarily invest in AI, big data, education, consumption upgrading, and business-to-business services.
Hong Kong will consider offering more incentives to
attract global angel investors, Financial Secretary Paul Chan Mo-po said in a
“The Hong Kong government has been changing laws to make it easier for these companies to come to Hong Kong. The government will also consider offering more tax and other incentives to attract overseas angel investors to set up here,” Chan added, without giving more details, according to SCMP.
He wrote the blog after a visit to Silicon Valley and
Seattle last week. “The trip showed Silicon Valley was also aware of Hong
Kong’s efforts to promote start-ups and opportunities in the Greater Bay Area.
As of the end of last year, Hong Kong had 2,600 start-ups, eight of them
reaching unicorn valuations,” Chan said.