<article><p class="p1">China&#8217;s venture capital (VC) investments in Southeast Asia dived in the first half of this year on the back of challenges in cross-border dealmaking due to the virus and a lack of mega-rounds of over $100 million in the second quarter.</p></article>

<p class="p1">China&#8217;s venture capital (VC) investments in Southeast Asia dived in the first half of this year on the back of challenges in cross-border dealmaking due to the virus and a lack of mega-rounds of over $100 million in the second quarter.</p>
<p class="p1">Investments by Chinese VCs, defined as those with headquarters in Mainland China, fell 83 per cent in the first half of 2020 to $272.9 million, after jumping a whopping 849 per cent in H1 2019.</p>
<p class="p1"><img loading="lazy" decoding="async" class="alignnone wp-image-199235 size-full" src="https://media.dealstreetasia.com/uploads/2020/07/Chinese-Investments-SEA-H12020-1.png?resize=640,331" alt="" srcset="https://media.dealstreetasia.com/uploads/2020/07/Chinese-Investments-SEA-H12020-1.png?w=908 908w, https://media.dealstreetasia.com/uploads/2020/07/Chinese-Investments-SEA-H12020-1.png?resize=300,155 300w, https://media.dealstreetasia.com/uploads/2020/07/Chinese-Investments-SEA-H12020-1.png?resize=768,398 768w" sizes="(max-width: 908px) 100vw, 908px" data-recalc-dims="1" /></p>
<p class="p1"><em>Source: Refinitiv</em></p>
<p>This contrasts with an accelerated pace of foreign direct investments by Chinese companies into the region, as manufacturers seek non-tariffed bases amidst the ongoing the US &#8211; China trade war, <a href="https://asia.nikkei.com/Economy/Trade-war/Trade-war-steers-Chinese-investment-toward-Southeast-Asia">Nikkei Asia Review</a> reported. In particular, new Chinese foreign direct investment in Vietnam, based on approved projects, swelled 5.6 times to $1.56 billion between the start of 2019 and May 20, 2020.</p>
<h3 class="p1"><b>Pace lags behind the region’s deal activity</b></h3>
<p class="p1">Southeast Asia&#8217;s startups raised $2.8 billion in Q2 2020, comparable to the $2.9 billion in Q1 but almost double that from a year ago, according to data compiled by DealStreetAsia &#8211; Research &amp; Analytics. This means investments by Chinese VCs made up close to 5 per cent of the region’s total deal value in the first half of this year.</p>
<table width="340">
<tbody>
<tr>
<td width="71"></td>
<td colspan="2" width="269">Southeast Asia Deals</td>
</tr>
<tr>
<td>Time Frame</td>
<td>Deal Count</td>
<td>Announced Deal Value ($m)</td>
</tr>
<tr>
<td>Q1 19</td>
<td>127</td>
<td>2,847</td>
</tr>
<tr>
<td>Q2 19</td>
<td>113</td>
<td>1,447</td>
</tr>
<tr>
<td>Q3 19</td>
<td>135</td>
<td>3,035</td>
</tr>
<tr>
<td>Q4 19</td>
<td>101</td>
<td>955</td>
</tr>
<tr>
<td>Q1 20</td>
<td>146</td>
<td>2,927</td>
</tr>
<tr>
<td>Q2 20</td>
<td>184</td>
<td>2,794</td>
</tr>
</tbody>
</table>
<p><em>Source: DealStreetAsia &#8211; Research &amp; Analytics</em></p>
<p class="p1">Gojek’s $1.2 billion and Grab’s $856 million financing rounds boosted deal value for Southeast Asia in Q1 2020 whereas Tokopedia ($500m), Gojek (about $300m) and Ninja Van ($239m) supported deal value in Q2 2020.</p>
<p class="p1">The deal volume in Southeast Asia for Q2 this year rose 63 per cent over last year, mainly due to pent-up demand and fundraising negotiations that began prior to movement restrictions caused by COVID-19.</p>
<h3><b>Far from the peak seen in 2018</b></h3>
<p>Average deal size by Chinese VCs in H1 2020 shrunk to $17.1 million from $126.3 million a year ago. The deal value was only slightly higher than the $15.7 million seen in H1 2018.</p>
<p class="p1"><img loading="lazy" decoding="async" class="alignnone wp-image-199246 size-full" src="https://media.dealstreetasia.com/uploads/2020/07/Average-Deal-size.png?resize=640,385" alt="" srcset="https://media.dealstreetasia.com/uploads/2020/07/Average-Deal-size.png?w=898 898w, https://media.dealstreetasia.com/uploads/2020/07/Average-Deal-size.png?resize=300,180 300w, https://media.dealstreetasia.com/uploads/2020/07/Average-Deal-size.png?resize=768,462 768w" sizes="(max-width: 898px) 100vw, 898px" data-recalc-dims="1" /></p>
<p><em>Source: Refinitiv</em></p>
<p class="p1">Chinese VC investments in Southeast Asia reached a peak in Q3 2018 (see chart below), riding on the back of mega deal rounds by late-stage companies in this region. A majority of big financing rounds in 2018 were announced by high-profile names such as Grab, Gojek, Lazada, Tokopedia and Sea Group.</p>
<p class="p1"><img loading="lazy" decoding="async" class="alignnone wp-image-199245 size-full" src="https://media.dealstreetasia.com/uploads/2020/07/Quarterly-Investments-Into-SEA-1.png?resize=640,503" alt="" srcset="https://media.dealstreetasia.com/uploads/2020/07/Quarterly-Investments-Into-SEA-1.png?w=908 908w, https://media.dealstreetasia.com/uploads/2020/07/Quarterly-Investments-Into-SEA-1.png?resize=300,236 300w, https://media.dealstreetasia.com/uploads/2020/07/Quarterly-Investments-Into-SEA-1.png?resize=768,604 768w" sizes="(max-width: 908px) 100vw, 908px" data-recalc-dims="1" /></p>
<p class="p1"><em>Source: Refinitiv</em></p>
<p>In particular, Grab raised $1 billion in its Series H round where Ping An Capital and China Cinda Asset Management were involved, according to Crunchbase data. Between February 2018 to October 2018, Indonesian unicorn Gojek also raised $1.5 billion in a Series E round, in a <a href="https://www.dealstreetasia.com/stories/hera-capital-guillaud-97725/">deal-by-deal</a> model, leading up to the $920 million raised for its Series F. Tencent Holdings, Meituan-Dianping, and JD.com were involved in these huge financing rounds.</p>
<p>Despite slower flow of China venture capital into the region, Shanghai-headquartered Qiming Venture Partners and 01vc have indicated their interest in looking for deals in Southeast Asia despite the Covid-19 headwinds, <a href="https://www.businesstimes.com.sg/garage/chinese-vcs-sanguine-on-asean-despite-covid-19-and-geopolitical-headwinds">Business Times</a> reported. This is due to the region&#8217;s accelerated digital adoption and favourable demographics. Both venture firms have been actively looking at South-east Asia&#8217;s venture scene since around 2016.</p>
<div class="page" data-page-number="23" data-page-label="19" data-loaded="true">
<div class="textLayer"><em>(Note: Lazada completed its secondary market transactions worth $2 billion in March 2018 (Q1) but this may not be captured in Refinitiv data, where Alibaba Group was lead investor.)</em></div>
</div>


Investments by Chinese VCs, defined as those with headquarters in Mainland China, fell 83 per cent in the first half of 2020 to $272.9 million,

China VC investment in Southeast Asia drops substantially in H1

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief

China VC investment in Southeast Asia drops substantially in H1

Continue reading with Data Vantage

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief