Chinese tech startups are leveraging the current enthusiasm for artificial intelligence, fueled by the DeepSeek technology, and recent support from President Xi Jinping, to secure fresh funding in Shanghai and Hong Kong. Venture capitalist Andrew Qian mentioned that companies like Rid Vision, AI CARE Medical, and Shanghai Qingbao Engine Robotics are actively seeking financing onshore. According to Qian, the surge in interest is due to the emergence of groundbreaking innovators with disruptive technologies, a departure from the past trend of imitation within Chinese startups.
The upsurge in AI-related businesses, such as chipmakers, cloud service providers, and AI apps, is injecting vitality into China's venture capital sector. However, the outlook for investment returns remains uncertain due to stringent regulatory scrutiny of IPOs domestically and escalating tensions between the US and China affecting offshore listings.
Despite these challenges, recent AI advancements and President Xi's engagement with tech leaders have bolstered investor confidence in the short term. Companies positioned to benefit from China's AI progress are attracting significant investment interest. For instance, LibLib AI and SenseCare recently secured substantial funding rounds, signaling investor enthusiasm. Notably, New Access Capital is exploring investments in chip startups and other cutting-edge technologies to capitalize on the current trend, anticipating the next DeepSeek-like breakthrough in these sectors.
This resurgence in venture capital interest follows a period of sluggish performance, with China experiencing a decline in venture fundraising and investments post-2021 peak levels. Despite the industry's heavy reliance on IPOs to exit investments, regulatory changes and geopolitical tensions have disrupted exit strategies. However, the launch of DeepSeek's AI model has uplifted market sentiment, fostering a more optimistic outlook on China's future among entrepreneurs and investors.
While there are indications of a gradual return to normalcy in the A-share market's IPO activity, Huo Zhongyan of Bonanza Capital remains cautious about immediate relaxation of IPO criteria by Chinese regulators. Huo also highlights the vulnerability of offshore listings to geopolitical shifts and market fluctuations, despite signs of recovery in that sector.