China tech financial ecosystem matures as Hong Kong IPOs boom

Hello, I’m Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection, a concise summary of what I’m seeing and hearing from local businesses.

My recent conversations with investors reveal a notable shift: China has recognized how finance is fueling the rise of Silicon Valley, and is following suit. Growing pains and risks aside, this could mean serious competition for the US

Follow the money behind China’s latest tech boom and you end up in Hong Kong, the most globally accessible of Chinese exchanges. It came back to life last year.

emerging companies more funds It has more public listings on the Hong Kong market than any other exchange. Now, more than one 400 companies are lining up to list – and I’ve heard much higher estimates thanks to the relatively new feature of the exchange private listing rules.

“This [surge in Hong Kong listings] Gary Lock, a Hong Kong-based partner at IPO consultancy King and Wood, told me on the sidelines of a venture capital forum in Hangzhou last month.

Lock said current capital markets activity is “much, much larger” than anything seen in the last 35 years. Foreign money has been flowing into Hong Kong banks since the Iran war began two months ago and is poised to invest in China, he said.

More than 40 companies have listed in Hong Kong so far this year as regulations ease and US scrutiny on investment in sensitive Chinese sectors (such as defense technology) increases.

Jin Yang, lead partner in KPMG China’s Hangzhou office, said the revival of capital activity in Hong Kong has helped shake perceptions that Hong Kong does not offer trading volumes and stock valuations on the same scale as the United States.

And yet Reports that Beijing is making it difficult As for overseas-structured Chinese companies listing in Hong Kong, none of the five investors and advisors I spoke to for this article were concerned it would halt the flow of IPOs.

Only 15 percent of the Hong Kong pipeline could face regulatory scrutiny from China, Goldman Sachs analyst Si Fu said in a report last month. It predicts Hong Kong listings will raise about $60 billion this year; This is almost double the $36 billion collected in 2025.

These regulations also erode international investors’ competitive advantage in securing start-up deals in China because founders are incentivized to seek domestic financing, King and Wood’s Lock said.

When a local firm can make decisions faster and offer better valuations, Lock says, “Who needs SoftBank?” he said.

Puhua Capital, one of China’s leading venture capital firms, does not expect any major changes in foreign investment this year, founding managing partner Shen Qinhua told me.

But Hong Kong expects the IPO momentum to continue. About 60 percent of Puhua’s total investments are in “hard technologies” such as artificial intelligence, chips and commercial aviation, Shen said.

More Chinese IPOs in Hong Kong are another step on China’s path to developing its own thriving tech ecosystem. Listings are a critical way for early-stage investors to realize potentially significant returns, encouraging more funding to support Chinese startups trying to become global players.

There are growing signs that China is catching up with Silicon Valley and Wall Street in other ways as the younger generation takes the lead.

Previously, Chinese entrepreneurs preferred to maintain control over their companies for as long as possible; This made majority-owned IPOs the most popular option.

But now founders of sometimes multiple startups are more open to selling their businesses or engaging in mergers and acquisitions, said Zhou Kaibing, president of the Hangzhou venture capital association. This is increasing the size of the industry by creating more options for investors to make money.

Things are also changing when it comes to technology.

While Chinese companies have previously emphasized their focus on creating industry-focused AI that will deliver immediate business returns, US companies have been trying to create superhuman artificial general intelligence.

But investors in China are increasingly looking for entrepreneurs with a vision for the future and a clear view of how their technology fits into it, said Qi Ruan, partner and vice president of S&R Venture Capital.

Globally competitive technology and a growing financial support system are helping to increase China’s attractiveness to foreign investors.

The Hangzhou VC forum attracts guests from as far away as India, Spain and Belgium, Zhou said.

According to Vijay K Thadani, vice-chairman and managing director of NIIT, the delegation, especially from India, included more than 20 business leaders, from Dharma Capital to industrial giant Tata. He also participated in a week-long trip to China.

Thadani said the companies are exploring investment opportunities and partnerships with Chinese robotics companies in the field of manufacturing.

Amid cross-border regulatory uncertainty, Ruan hopes his VC firm can expand, highlighting that it is the only fund in Hangzhou with a license that allows it to accept foreign capital while investing directly in Chinese yuan.

All of this reflects the fact that global money and innovation are no longer in the hands of the United States alone

Yet as the pieces fall into place for China to build its homegrown venture capital ecosystem, it will not be a copy of the US model.

Regulatory surprises are the main risk, Lock said. “A lot of what we do in this part of the world is based on politics.”

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