SA国际传媒

U.S. venture investors had already pulled back from China before President on Wednesday aimed at curbing American investment in sensitive technologies developed by its biggest global rival.聽

At the same time, China-based investors have kept their investment pace in the country steady since 2021.

That鈥檚 according to data, which shows U.S. startup investors are on pace to make only about half as many investments into Chinese companies as they did in 2022, which was already down significantly from 2021.

The most active U.S. startup investor in China since 2021 is , according to SA国际传媒. The Menlo Park, California-based firm has participated in 75 investment deals since 2021, leading 28 of them. But only four of those deals have been this year.聽

The firm has invested in Chinese ride-hailing unicorn , electric-vehicle maker , and data analysis company , among its hundreds of investments in Chinese companies.聽

The second-most active U.S.-based startup investor in China since 2021 is , an early-stage investor focused on AI-related companies. The Palo Alto-based firm has participated in 36 funding deals since 2021, leading 10 of them. This year so far, it鈥檚 been involved in only three deals, none of which it鈥檚 led.

Numerous large Chinese startups have benefited from American capital in recent years. Most prominent among them are owner . U.S. firms including , and have led investments in the company in recent years, SA国际传媒 data shows.

鈥楩undamentally rethinking鈥� China strategy

Biden鈥檚 order prohibits or restricts U.S. firms from investing in Chinese entities working on three sectors that carry potential national security risks: quantum computing, semiconductors and microelectronics, as well as some AI systems.

In a letter to , the president said he is taking emergency action to protect American interests “in sensitive technologies and products critical to the military, intelligence, surveillance or cyber-enabled capabilities.”

Experts who watch U.S.-China relations closely say the order, which applies to venture investors and other private equity, will add to the growing unease American firms have with putting capital into the world鈥檚 second-largest economy.

, a partner with the boutique research firm , that the American companies he works with are becoming more reluctant to do business with the Red Dragon.聽

鈥淲hat we always say鈥攁nd this resonates with our clients鈥攊s that the risk-adjusted return in China has changed dramatically,鈥� Polk told the Journal. 鈥淪o what we see is a lot of companies fundamentally rethinking their China strategies. It doesn鈥檛 mean they鈥檒l necessarily change them, but they鈥檙e stress testing them now, because we鈥檙e clearly in a new environment.鈥�

Chinese investment stabilizes聽

Venture funding to startups in Asia fell 50% in the first half of the year, SA国际传媒 data shows.聽

However, the decline was led by significant drops in funding to India and Israel, while China actually stabilized. In fact, quarterly funding to Chinese startups in the second quarter of 2023 was $11.2 billion 鈥斅爃igher than both Q1 2023 and Q2 2022.聽

American venture activity in China already ranks a distant second compared to domestic investment, SA国际传媒 data shows. Since 2018, China-based investors have done more than 25,000 startup deals in the country. That doesn鈥檛 include Hong Kong-based investors, who did another 1,228.聽

U.S.-based investors, for comparison, participated in fewer than 2,000 deals in that time. U.S. investors did 293 startup deals in China last year 鈥� the lowest annual count since at least 2018, SA国际传媒 data shows.聽

This year is on pace to mark the slowest pace of U.S. venture investment in China in at least five years, with only 94 deals recorded as of early August.

China-based investors, meanwhile, may be on pace to exceed their deal totals from last year. Those investors have already made more than 2,800 investments into their domestic startups so far this year.

Related Reading:

• Asia Startup Funding In First Half Of 2023 Falls 50% As Late Stage Continues Decline
• India, Israel Lead The Way In Asian Venture Market Drop