Chinese Venture Capitalists Warn IPO Freeze Will Hinder Tech Innovation

• 18 July 2024
• Property Focus
• 1906 Views

Chinese venture capitalists have cautioned that the current IPO freeze is depriving tech startups of crucial funds, keeping market participants locked into existing investments and undermining Beijing’s push to enhance innovation in the economy. At the three-day ChinaVenture Investment Conference in Shanghai, firms voiced concerns over difficulties in recouping investments through traditional initial public offerings. This warning was published by Asia.nikkei.com on 23 June 2024.

The rare public criticism of regulatory measures at this high-profile industry summit comes amid increased official scrutiny of new listings, aimed at reviving the secondary market by slowing the pace of public share sales. “The biggest problem is exit. This would lead to an investment drought for startups, which will be a very big issue that will impact China’s technology innovation,” said Deng Feng, founding partner of Northern Light, during the conference.

Data from LSEG highlights a sharp decline in funds raised via IPOs in mainland China, plunging nearly 90% to US$2.6 billion in the first four months of the year, the lowest since 2013. Additionally, more than 130 Chinese IPO candidates have terminated their listing plans so far this year. Venture capitalists in China are already grappling with a slowing economy and geopolitical tensions that complicate tech investments and offshore company listings.

Yang Xiaolei, CEO of ChinaVenture Investment Consulting, pointed out that policies supporting the secondary market have been “upending the primary market.”

A survey by ChinaVenture indicates increasing pessimism among Chinese VCs, with most respondents citing policy uncertainty as the industry’s biggest threat, leading many to start cutting staff.

Andrew Yan, managing partner of SAIF, a China-focused private equity investor managing over US$5 billion, stressed that policy missteps could be more damaging than market dysfunction. Deng called on the government to introduce detailed policies to support the struggling VC industry. The Politburo of the Communist Party stated on 30 April that China should promote venture investment and bolster long-term capital.

“These slogans are absolutely right, but how to turn them into concrete measures?” Deng queried, urging the industry to unite in calls for support.

ChinaVenture’s Yang echoed these sentiments during the conference, saying, “We really hope that the government and regulators can attach importance to the primary market, treat it well and listen to its voice.”

• Business and Market