China recorded US$40 billion in venture capital investment deals in 2017, a 14.3% increase from US$35 billion in 2016, buoyed by a flurry of massive investment in artificial intelligence and automobile technologies in the fourth quarter, according to a report by KPMG.
Worldwide VC investments in AI almost doubled in 2017, attracting $12 billion of investment, compared to $6 billion in 2016. A significant portion of AI-related VC deals happened in the fourth quarter in China, specifically in sharing-economy companies employing AI to enhance their business models.
China’s largest ride-sharing firm Didi Chuxing and on-demand local service platform Meituan-Dianping topped the list with US$4 billion round each. Bike-sharing start-up Hellobike and secondhand car trading platform Guazi are also on the list.
Face++, an artificial intelligence company specializing in facial recognition raised US$460 million in a series C round in October led by China State-Owned Assets Venture Investment Fund, with Ant Financial and Foxconn Technology Group participating.
Meanwhile, it’s Hong Kong-based competitor SenseTime Group was was in the process of attracting $500 million from US mobile chip giant Qualcomm Technologies in the last quarter 2017, according to the report.
"AI investment is a big focus in China, not just for VC investors but for the big tech players like Baidu, Alibaba and Tencent. The challenge for many will come down to talent," said Egidio Zarrella, clients and innovation partner at KPMG Hong Kong, "Corporates, in particular, are making strategic acquisitions simply as a means to capture talent.”
Another sector favored by VC investors in China is autotech, highlighted by Shanghai-based electric car company NIO attracting a $1 billion Series D round led by Tencent . Last December, Alibaba, GGV Capital and Matrix Partners China invested an undisclosed amount in electric vehicle maker Xiaopeng Motors. Also, Tencent and Sequoia Capital China invested in Chinese electric vehicle developer WM Motor.
In terms of regions, Chinese investors favored Southeast Asia and Brazil, due to their large populations, growing middle class and increasing appetite for consumer products and services, according to KPMG.
"While U.S. investors have pulled back from Latin America, Chinese investors, particularly China’s big tech giants, have been increasingly interested in both Brazil and the broader Latin America region," said the report.