Trade war

US or China? startups begin to choose sides

Startups face a dilemma. Should they be based in the US or China?

The ongoing US-China trade war means that startups are beginning to think about which market they are going to stay in. It is a difficult choice.

“More entrepreneurs are selling their businesses in the US and coming back to China to restart,” Nisa Leung, managing partner of Qiming Venture Partners, said on a panel at RISE Hong Kong on Tuesday. The tech startup and investment conference RISE is held in Hong Kong from July 8 to 11.

Some startups have gone one step further. “Now companies are choosing sides, either in the US or in China,” said Harry Man of Matrix Partners on the same panel. 

China venture capital investments, especially RMB ones, always distinguish themselves a little bit from the rest of the world. Chinese startups have to think several steps ahead as they develop their business. The ones that are aiming for an international market need to form a variable interest entity (VIE) structure when starting the company, while ones that are focused on the Chinese market will only look for RMB investment.


Thanks to the US-China trade war, that gap has widened. Before trade tensions emerged, Chinese startups were always talking about global business. Ever since the Trump government imposed tariffs on some China-imported products, startups and investors have shifted their focus away from the affected sectors.

Chinese corporate funds need to be more careful when choosing an investment project. Donald Lacey, COO of Ping An’s Global Voyager venture fund, said that he would not touch startups that were affected by the trade war. Fintech or health tech companies are a safer option for funds supported by Chinese corporates.

“Most Chinese startups, even tech startups, are satisfied with the domestic market,” Lacey added.

Business leaders also have to choose between the US or China when they want to establish a company. Given current geo-political circumstances, whether entrepreneurs choose the US or China to set up a company depends largely where the market will be in the future. 

And universities in the US have also been affected. The new visa policy means that some students have taken the US off their list when choosing universities. “I would be worried if I ran a university in the US,” said Nisa Leung. 

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