Investment in rapidly expanding Asian emerging markets by China currently commands nearly 75% share in private equity and venture capital investments within the region
According to Preqin. Over the past decade, cumulative fundraising amounts targeting the Asia-Pacific region show China holding a staggering 74.3% share. This figure is drastically higher compared to Japan and Korea combined, which stand at 10.1%.
Chinese funds primarily focus on investing in domestic emerging companies, but investment in India and ASEAN has more than tripled in the past five years.
Notable investments include Tencent's investment in India's Swiggy in 2020, Alibaba's investment in Indonesia's Tokopedia, and the recent merger agreement between Tokopedia and Gojek backed by Tencent. These are all part of a significant trend. Over the past five years, Chinese companies have invested billions of dollars in high-tech startups in this region.
The underlying theme is to replicate the success of established digital business models within China in foreign markets like Southeast Asia and India. This includes areas such as payments, mobility, and social commerce. China's innovation, which has outpaced advanced countries like Japan, is driving capital waves into other emerging Asian markets.
Asia's dry powder is at its highest level ever, with low-interest rates and increasing investor demand for IPO opportunities. The private equity/venture capital industry in China is expected to continue its robust investment momentum in 2021.
Southeast Asia saw the birth of 40 million new users last year, with 94% of consumers intending to continue using these services even after the pandemic.
In Southeast Asia, there were 40 million new users born last year. According to a report by Google, Temasek, and Bain & Company, over a third of them started using new services due to COVID-19, with 94% intending to continue using these services even after the pandemic. These services include educational technology, food delivery, and financial services. E-commerce remains the largest category in Southeast Asian internet services, accounting for over half of the total GMV, followed by food and transportation.
Capturing these changes as business opportunities will significantly impact the future business outlook in the region.
Foreign investment regulations in the tech sector are not immune to geopolitical dynamics, with India's conservatism standing out.
Chinese companies with abundant capital, such as Alibaba and Tencent, have significantly allocated investments overseas, with many high-tech startups in India and Southeast Asia becoming part of competitive portfolios of Chinese venture capital. For example, Alibaba, based in China, acquired Lazada, which operates in six major ASEAN countries (Singapore, Thailand, Indonesia, Malaysia, the Philippines, and Vietnam), in 2016.
In this regard, India's conservatism towards Chinese tech capital stands out compared to its relationship with Southeast Asia. Last year, India banned hundreds of Chinese-made apps, reducing new investments from China, and blocking the entry of hundreds of Chinese-made products worth over $2 billion. After investments have established a presence in their respective economic spheres, it remains a question how Chinese capital will continue to stimulate sustained growth and withstand the impact of regulations limiting capital outflows, a point vulnerable to geopolitical influences and still under debate.
Japan, which has significantly lagged behind China, is accelerating its investments in the digital space within the region, aiming to enhance its presence as an investment destination.
As the importance of Chinese venture capital in developing Asia's digital economy grows, Japan, which has boasted a significant presence in the region as a direct investor, finds itself significantly trailing in the digital sector.
For Japanese companies and funds, actively accessing networks in the technology sector of emerging Asia, including ASEAN and India, and establishing a presence as an investment destination is crucial. As digital transformation becomes a prevalent agenda in management discussions, this remains a significant point of contention.
Thank you for reading until the end. For inquiries about the article content, information on M&A deals and potential partners in related industries, or consultations on market research, please contact the respective representative or use the inquiry form.
Comments