A factory in Suqian, Jiangsu province, China, on May 9, 2022.
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BEIJING – By numbers, manufacturing companies in China made the most investments in the first half of the 37 sectors tracked by the Qimingpian business database.
In fact, the number of early-to-pre-IPO deals in the manufacturing sector has increased by about 70% year-on-year despite the containment of Covid and the decline in Chinese stocks in the past year. past six months.
Preliminary data shows that about 300, or nearly a quarter of those transactions, involve semiconductors. Some of the listed investors are government-related funds.
Data on early-stage investments is not always complete due to the private nature of transactions. But the available figures may reflect trends in China.
Investor interest in chip companies comes as Beijing has cracked down on consumer-focused internet companies, while promote the development of technology such as integrated circuit design tools and equipment for semiconductor manufacturing.
According to Qimingpian, the manufacturing sector accounted for about 21% of investments in the first half of this year. The second most popular industry is business services, followed by healthcare and medicine.
Startups related to electric cars and transportation topped the list by raised capital, at 193 billion yuan ($28.82 billion), based on available data. Amounts were not disclosed for many deals.
Gobi Partners managing partner, Chibo Tang, said: “Over the past 12 months, there has been a lot of hot capital inflows following a number of deals in sectors where the government is actively promoting,” said Chibo Tang. , said the managing partner of Gobi Partners. This trend has led to a significant increase in value, he said, while the fundamentals have not changed much.
The two-month lockdown in Shanghai and Covid-related restrictions have affected business sentiment and prevented people from traveling to discuss and close deals.
According to CNBC calculations of Qimingpian data, in the first half of this year, total investment in China fell 29% year-on-year and down 25% from the second half of last year.
“With the market downturn in recent months, there is a lot of capital on the sidelines,” Gobi Partners’ Tang said Monday on CNBC.Squawk Box Asia. “
His firm expects more early-stage investment opportunities to emerge over the next 12 months, as valuations drop. Tang notes how many startups that raised capital 18 months ago have growth forecasts that are now reset lower.
“Founders are having a harder time raising money, so the conversations we have with them are how they should save capital, how should they expand the runway,” he said. .
In the past 12 months, Beijing’s crackdown on technology and education companies follows DidiNew York’s IPO has suspend the ability to withdraw cash of investment funds easily staking their bets through an initial public offering.
While the future of listing Chinese stocks in the US remains in limbo, many startups have opted for a market closer to home.
But as of June 14, more than 920 companies are still lining up to list shares in mainland China and Hong Kong, according to an EY report. That has changed little from March.
“The pipeline remains robust in part due to a backlog from several delayed IPOs since Q1,” EY said in the report.
Sentiment in mainland markets increased as Covid control measures eased over the past few weeks. Despite a year-to-date decline of more than 6%, the Shanghai composite gained nearly 6.7% in June for its best month since July 2020.