China continued to account for the largest share of VC funding in Asia despite soft global investment, KPMG analysis finds

EV still a big ticket for VC investors in China

01 November 2023

2 min read

1 November 2023, Hong Kong (SAR), China ("Hong Kong") – Despite a quiet quarter for the venture capital (VC) market globally, China continued to account for the largest share of VC funding in Asia in Q3’23 with 8 of the largest 10 deals completed in Asia. In particular, it was the electronic vehicle (EV) space that pulled in the majority of big deals with all startups based in China, according to KPMG analysis.

In Q3’23, VC-backed companies in the Asia region raised USD 20.3 billion across 2,582 deals, according to the latest KPMG’s Venture Pulse Q3 2023 report. Despite soft investment compared to historical norms, China continued to account for the largest share of VC funding in Asia in Q3’23, including a USD 1.87 billion raise by GTA Semiconductor, a USD 1 billion raise by Rox Motor and a USD 969 million raised by Neta Auto.

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

We continue to see sizeable investments into the areas that align with the long-term strategic priorities of the Chinese central government. From semiconductors to clean technology to electric vehicle production – venture capital investment continues to focus on key industries that support China’s long-term ambition and desire for self-reliance.

Within China, EV continued to be a big ticket for VC investors during Q3’23. EV-focused companies in China have matured quite rapidly in recent quarters, with a number now starting to look beyond the domestic market to fuel growth. VC investors in China also showed significant interest in new materials, from materials used in EVs and semiconductors to materials related to chemicals. Broader energy solutions also remained high on the radar of VC investors in China, with some solar-focused companies considering expansion efforts, investments, and partnerships in Southeast Asia and in the Middle East.

Zoe Shi, Partner, KPMG China, says:

EV is a very hot topic in China recently and we are seeing a number of OEMs going overseas to show off their new cars and models. These companies aren’t only focusing on the China market anymore, even with our big population. They are also looking at the European market and at other Asian countries as markets for additional growth.

The interest of VC investors in AI continued to grow in Asia during Q3’23, mirroring interest in other regions globally. The rapid evolution of GenAI over the last few quarters, however, has led to an increasing regulatory focus on the space, particularly in China. During Q3’23, the Cyberspace Administration of China enacted high level guidance in order to help foster and govern the evolution of GenAI in the country, with a particular focus on ensuring data security and appropriate controls.

Fintech gained some attention in Hong Kong during Q3’23, driven by a USD 458 million raise by wealthtech Micro Connect. During the quarter, the Hong Kong Monetary Authority also released a new fintech promotion roadmap to support and foster fintech adoption. As Hong Kong continues to encourage a more digitized financial services environment, there will likely be additional fintech investments.

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

Global market conditions are affecting activity here in Hong Kong, but the fundamentals of the market are still very sound and the Hong Kong financial system is still stable. We are seeing a lot of effort by the government, regulators and the Hong Kong Stock Exchange (HKSE) to engage with investors, funds, and institutional investors in different parts of the world.

During Q3’23, IPO activity in Hong Kong and mainland China remained soft. China Securities Regulatory Commission (CSRC) introduced a number of measures to help improve the performance of its stock market, support the secondary market in the country, improve liquidity, and support innovative companies in specific industries. On the other hand, Hong Kong Exchanges and Clearing Limited also opened an office in London in order to expand its reach, better engage with investors and funds in the UK and Europe, and foster a more connected investment environment globally.

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