China dominated VC megadeals in Asia-Pacific in Q1 2022, finds KPMG

Chinese companies accounted for five of the top 10 VC deals in the quarter, with deals focused on government’s priority tech sectors

Chinese companies accounted for five of the top 10 VC deals in the quarter...

22 April 2022, Hong Kong ─ The level of venture capital (VC) investment in Asia remained relatively solid in Q1 2022 compared to historical norms – in part due to the number of US$100 million+ megadeals seen across the region, according to KPMG’s latest Venture Pulse Q1 2022 report. A number of Asian jurisdictions attracted US$500 million+ funding rounds in Asia, the report highlighted, showcasing the growing strength of the region as a whole.

Total venture financing in the region reached US$32.6 billion across 2,712 deals during the period, 21.8% lower compared with the first quarter of 2021. The decline was attributed to ongoing global geopolitical uncertainty, the COVID-19 Omicron wave, increasing market volatility, and continued regulatory changes in China. Despite the lower cumulative value of deals, wide range of sectors attracted fresh investments, including EdTech, food delivery, HealthTech, and B2B services. The region also saw relatively healthy exit rates in the first quarter with close to US$80 billion in exit value, heralding a strong start to the year.

Chinese companies dominated the VC landscape in Asia-Pacific during the first quarter of the year, accounting for five of the top 10 deals. Some of the megadeals involving Chinese companies included US$800 million series B funding for Suqian-based JD Property (China) and US$784 million series B funding for Chongqing-based Changan New Energy Vehicles Technology.

Egidio Zarrella

Egidio Zarrella, Partner, Clients and Innovation, KPMG China, says:

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China continues to signal its long-term commitment to building its technology ecosystem–in particular in areas deemed to be of strategic importance to overall economic growth. VC firms are increasingly aligning with these strategic initiatives, allocating additional funds into building out localised supply chains for everything from electric vehicles to semiconductor production.

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Allen Lu

Allen Lu, Partner and Head of TMT Audit of KPMG China, says:

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Over the past quarter, electric vehicle companies and technologies attracted significant funding in China – both from corporates and from traditional VC firms. This is a space that will likely continue to attract attention and investment as it aligns very well with the central government’s priorities, which is to boost the economy and drive employment.

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While China dominated megadeals, the country’s total level of VC investment during the quarter was impacted by the Omicron wave of COVID-19 as well as the seasonal slowdown during the Lunar New Year holiday period. Looking ahead to the rest of 2022 and beyond, KPMG believes the VC ecosystem in China and the rest of Asia Pacific will fully rebound from recent pandemic-driven declines, with significant market opportunities opening up as countries invest more heavily in reshoring of domestic supply chains.

Allen Lu

Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong Region, KPMG China, KPMG China, says:

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The Omicron wave of COVID-19 and associated control measures continue to impact markets across Hong Kong SAR and Mainland China. While interest in deals remains strong, particularly in areas that align with the country's priority technology focus areas, valuations may be temporarily impacted until the pandemic situation shows signs of improvement.

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