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China’s private equity and venture capital (PE/VC) industry has been a story of burgeoning growth mixed with market correction. Although China’s PE/VC market only started in the early 2000s, investors’ appetite has made it the second largest in the world. In 2021 alone, China-focused PE/VC funds raised an aggregate of $72bn, and the country’s total PE/VC AUM has reached $1.92tn by the year end.

Paying attention to China’s long-term and top-level policy decisions is always the key for general partners and venture capitalists to invest as well as manage their risks in China. Seizing the country’s transition from export-dependent to innovation-powered, and investing advanced technologies can be rewarded. Meanwhile, ignoring signs and messages from the government might be done at investors’ peril, as regulatory shake-ups last year showed.

Investing in China’s PE/VC market becomes more complicated due to geopolitical, regulatory and other concerns, but foreign especially Asian investors remain highly committed to China. The fundamental drivers behind the enthusiasm lie in the country’s ever rising consumption power and unswerving focus on innovation. 

In the fifth episode of “China Finance with a Cup of Tea,” Caixin invited Ms. Anna FANG, CEO and Founding Partner of ZhenFund, an early-stage venture capital firm, and Mr. LIAO Ming, Founding Partner of Prospect Avenue Capital (PAC), a growth capital fund, to share their insights on the private equity and venture capital industry in China and what international investors can do to navigate this market.