Off the peak

Chinese equity investment cools down in Q1

Credit tightening has seen Chinese equity investment drop 49% over the past year. But while fintech has borne the brunt of investor caution, healthcare still stands out at the sector to watch.

Although some heat still remains in the healthcare sector, in the first quarter this year Chinese equity investment dropped to its lowest level for the past five quarters.  

A report from third party research firm IT Juzi said that 883 companies raised only $23.3 billion in Q1 in China. This is a 49% drop on the same period last year when equity investment was still booming.

PE investment number and amount in five quarters

Primary market activity has become more rational. It is noticeable that more investors are participating in the growth stage of company investments. Among the top 20 private equity investments this quarter, only three of them are early stage, while the rest are all post Series C.

Healthcare investment has become one of the hottest sectors. There were 130 investments in Q1, and a third of these are related to pharmaceutical companies. The average investment in pharmaceutical companies hit $33.4 million.

Fintech stands in sharp contrast to this. Investment in financial technology companies was top of investors’ lists in Q1 last year, but it has fallen dramatically since the second quarter of 2018. 

“The fintech sector in China saw a drop in deals and funding mainly for three reasons: tighter credit in China, lack of regulatory guidance for online lending, and continued growth of tech giants,” said Lindsay Davis, senior intelligence analyst at CB Insights.

“Venture investments in fintech companies are very difficult to turn into business,” added Evan Xu from DT Capital. “Investors have adjusted their focus and are pouring more money into enterprise service projects.”

Since Chinese investors have cooled down, fintech deals have shifted to Southeast Asia and India. According to CB Insights, India’s fintech funding not only surpassed China in Q1 this year, it topped all Asia markes with $286 million.


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