VC funding in China startups sees 48.2% drop to $9.5 billion in Q1 2023

China-based startups had to navigate through a challenging regulatory environment and volatile market conditions during the first quarter (Q1) of 2023. As a result, they raised $9.5 billion in venture capital (VC) funding during the quarter, marking a 48.2% year-on-year (YoY) decline in deal value from Q1 2022, reveals GlobalData, a leading data and analytics company.

An analysis of GlobalData’s deals database shows that a total of 820 VC funding deals were announced in the China during Q1 2023, a decline of 20.5% compared to Q1 2022.

Aurojyoti Bose, Lead Analyst at GlobalData, comments: “VC funding has declined globally across most of the markets due to factors such as macroeconomic challenges, recession fears and geopolitical tensions. Although China also registered decline, it is in a relatively better position compared to some of the other key markets.”

For instance, VC funding deal volume in the US, the UK and India YoY declined by 45.3%, 33.8% and 48.7%, respectively, in Q1 2023. The decline in terms of value for these markets stood at 50.2%, 58.1% and 74%, respectively.

China continues to be the top APAC market for VC funding in terms of deals volume as well as value. It accounted for 47% of the number of VC deals announced in the APAC region during Q1 2023 while its share of the corresponding deal value stood at 56.8%.

Subsequently, China stands next only to the US in terms of VC deals volume and value. It accounted for 15.3% of the number of VC deals announced globally during Q1 2023 and 14.3% of the total deal value.

Bose concludes: “China's VC market remains relatively robust, indicating that the country's start-up ecosystem is still growing and attracting investment. China's position in the global economy and its large population makes it an attractive market for startups and investors, which may contribute to its resilience in the face of the global economic challenges.”