China’s Venture Capital Boom Shows Signs of Turning Into a Bust – Bloomberg
What happened: The value of venture deals in China plummeted by more than 75% in the second quarter as investors show increased concern over unpredictable trade talks and sky-high startup valuations. Investment fell to $9.4 billion this year from $41 billion in the first quarter of 2018. The number of deals has halved to just under 700.
Why it’s important: The rise of China’s tech sector has put it in the crosshairs of the Trump administration, making investors nervous. In May, the US blacklisted Huawei from sourcing US-made components. A similar ban may be imposed upon several other companies, including Chinese artificial intelligence startups. High profile IPOs have also played a role in declining venture capital investment. Both Xiaomi and lifestyle services giant Meituan-Dianping saw their stocks slide after listing, leading many to believe that private-market valuations had got out of control. Some investors are becoming more selective, moving away from cash-burning companies that make up the rental economy and opting for those that are less capital intensive, including enterprise software providers.