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It may come as a surprise for the entire international investors’ community that the major investors are willing to invest more and more in Chinese startups. In the year 2020, while the economy of the entire world was plunging, it was China that demonstrated positive growth in its economy.
The businesses in China had managed to make it through the harshest times that the entire world faced due to the pandemic. Although things seemed even more promising for Chinese companies in the year 2021, the Chinese authorities had something different planned out for them.
Right from the beginning of the year 2021, the Chinese regulators carried out their crackdown against major companies in the country. Especially, the companies that were enlisted publicly through the US-based stock exchanges were on top of Chinese regulators’ hit-list.
However, the Chinese regulators did not restrict scrutiny to US-listed China-based companies, they went for local startups as well. These startups had the potential to outgrow and soon, make their presence known internationally.
Among the majority of the concerns, the major concerns raised by the Chinese regulators were pertaining to data protection and breach of antitrust policies. The regulators are closely monitoring these two major factors of any startup launching their operations from Chinese soil.
Although the Chinese regulators have adopted a strict stance against their China-based companies, still things seem to be working out in their favor.
Due to strict regulatory compliance demonstrations, Chinese companies and even startups are gaining the trust of international investors. This is the reason why investors are more than willing to make huge investments in startups from China.
The third quarter of 2021 is a clear demonstration of such claims. Prior to the regulators’ crackdown on Chinese companies, many Chinese companies were going for their initial public offerings (IPO) on the US stock exchanges.
Although the IPO launch activity has been paused, still international investors are willing to invest in Chinese companies.
The data shows that from the start of July until the end of September, venture capital investments have grown tremendously in Chinese companies. According to stats, the venture capital investments made in the Chinese firms from the beginning of 2021 until September were more than the entire year of 2020.
Among all the international investors, the interest level of the investors based in Asia is more in the China-based companies. At present, the interest level of North American and European investors is less than Asian investors in China-based companies.
With the threat of scrutiny still lingering over the China-based companies, it is highly likely that these companies will enlist themselves through the Hong Kong Stock Exchange. Therefore, investors must keep a close eye on Hong Kong Stock Exchange as it may soon observe a lot of rallies.
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