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Xi Jinping’s way of getting big in China

G.rotor bay technologies The transformation into a phantom beast is speedy.Startup specialized for ultra-high speed Lithium battery Just 19 months later, it reached a $1 billion valuation, making it a unicorn (that is, a privately held company with a valuation greater than that). such creatures are much more numerous common in ChinaGreater Bay joins over 300 fields in 2022. This is double what it was five years ago. These new unicorns provide an interesting snapshot of the country’s changing industrial priorities.

So the list is constantly changing. Companies decline by going public or declining in value. Some of the most promising companies have stalled as they have encountered regulatory issues.Initial public offering (IPOFor example, fintech giant Ant Group ) was sold at the last minute of 2020 following pressure from regulators. Its valuation has reportedly dropped to about $64 billion from his pre-listing failure of over $300 billion. Others are getting stronger and stronger.Beijing base byte danceOwn the short video app TikTok.

To understand which sectors are prioritized and which ones are ignored or crushed, economist analyzed the changing composition of China’s top-rated startups over the past five years. The results reveal that the country is sweltering with unicorns eager to build products that the Chinese government endorses. They are emerging outside the established technology hubs of Beijing, Hangzhou and Shenzhen. And while Chinese privately-controlled tech giants such as Alibaba and Tencent once dominated the startup scene, much of their recent growth has been fueled by state-owned enterprises.

First, consider what the current unicorn is doing. Many are aligned with the government’s long-term goals for technology, including engineering a shift away from consumer Internet companies to areas the government believes will drive the future of the economy. These include green energy, semiconductors, smart manufacturing, software and artificial intelligence, and biotechnology.

The shift is also central to President Xi Jinping’s efforts to make China less dependent on foreign technology at a time when the United States is trying to dry out Chinese companies in advanced semiconductors.April 21 At a meeting with senior officials, Xi said the government must help companies break down technological barriers to achieve “self-reliance” in the most important areas.

As a result, since 2017, a lot has changed, as data from the Chinese Ministry of Science and Technology and research group Hurun show. At the time, e-commerce dominated the startup scene, with about 20% of unicorns operating in online sales and related industries (see chart). Another 13% were in fintech and 9% in culture and entertainment. These industries have since stalled. By the end of 2022, healthtech and biotech were the largest group of unicorns, accounting for about 13% of the country’s 315 unicorns. number of artificial intelligence (Love) Unicorn increased from 6 to 35. Unicorns in software, enterprise services, green energy, and robotics are springing up in places where little or none existed before. In 2017, he did not have a single private semiconductor company in China with a valuation above $1 billion. State media claim he will be 50 by the end of 2022.

Entire industries have disappeared from the list of unicorns. By 2017, China had nine of his education technology companies worth at least $1 billion. But in 2021, the industry was wiped out by a widespread government campaign against companies offering online courses to young students. By the end of last year, no such unicorn existed. Meanwhile, the recent crackdown on online finance has cut the number of high-value fintech companies in half.

Just as the unicorn sector has changed, so has the geography of innovation. The boom in consumer Internet technology has occurred naturally in China’s big cities, where wealthy consumers are concentrated. Some hubs, mainly Beijing, Hangzhou and Shenzhen, have become home to the most successful companies. But part of Xi’s revolution in China’s economy includes splitting development more evenly across China. This means funding more innovation in new locations. Known primarily as hubs for manufacturing rather than innovation, some big cities are becoming startup havens. Greater Bay, for example, is based in Guangzhou, part of the Southern China industrial zone (see map). So are other unicorns, from 3 five years ago he has 22.

Small cities are also part of the unicorn boom. Hitium, a 25 billion yuan ($3.6 billion) lithium battery maker founded in 2019 and most recently, is based in the southern city of Xiamen. A robotic-assisted surgery company called Sagebot has been established in Harbin, Lust He Belt, in northeast China. are planning ipo After recently achieving a valuation of 8 billion yuan.According to the list from forbesof a business magazine.

Funding sources have also changed dramatically over the past five years. Private enterprise behemoths are no longer the center of gravity of China’s tech industry. Not long ago, startup founders believed that the only business model that mattered in China wasb-ni-Bator Baidu, Alibaba and Tencent, one of China’s largest technology groups (collectively Bat). Alibaba and Tencent have emerged as two of the biggest forces in China’s venture capital industry, eventually replacing private his equity-focused firm. In 2017, his five top tech groups — Alibaba, Tencent, Xiaomi, Baidu and JD.com — invested in about half of China’s unicorn companies.

Today their influence is much less. By 2022, investment from the same top five technology groups will drop to about 21%.This is partially reflected government repression There is less investment than before due to the monopolistic behavior of tech giants. But it also reflects the emergence of new sources of funding, often state-sponsored.

For example, cash from government-backed funds is flooding into “hard tech.” Of the 50 semiconductor unicorns identified by Chinese state media as of the end of 2022, state-owned enterprises invested in or controlled 48 of them. Many large state-owned companies have taken on the role of startup incubators.Greater Bay, for example, is the youngest of four unicorns launched with capital from Guangzhou AutomobileGack), a state-owned automaker.By distributing funds to a large number of startups Gack It is becoming the nexus of transportation technology. Aion, a unicorn electric vehicle company, Gack, using Greater Bay battery technology. Ride-hailing startup Ruqi Mobility has gear from Greater Bay and Aion, GackThe automaker is also backing a semiconductor maker called CanSemi. CanSemi recently secured funding at a $1 billion valuation.

Shanghai-based startup Qiyuan Green Power, which provides battery charging and replacement services for heavy-duty trucks, has a similar story. The group was launched by State Power Investment Corporation (State Power Investment Corporation).spices) is a centrally controlled state-owned enterprise that holds control of Qiyuan. Setting up subsidiaries is nothing new for state-owned enterprises. But Qiyuan looks more like a startup than your typical government-owned company. It launched a funding round to attract private investment, competing with other private groups for cash and talented engineers. Last April, Greater Bay also raised funding from a number of private investors, including Tencent.

Qiyuan’s recent fundraising roadshow attracted 80 investors interested in buying shares, said company executive Guo Peng. As a “hybrid” company with both state and private interests, Qiyuan enjoys some of the efficiencies of private sector start-ups, but is backed by a powerful state group. Guo said the national pedigree has undoubtedly increased investor confidence in the company’s future.

State-owned companies are not the only ones rushing to enter. Huawei, a privately held telecommunications equipment maker, just launched its venture capital-style investment in 2019. Lithium battery company Helion, one of those companies in the past seven years, reached a valuation of 15 billion yuan last year, according to data compiled by Chinese investment information firm Itjuzi. If only a fraction of the investments made over the last four years are successful, the company should become a valuable hub for startup activity.

For Xi, this latest tech boom is both a source of pride and a potential problem. States are trying to stifle speculative bubbles in some areas while unleashing market forces in others. The flood of funds that once flowed into Internet businesses is called ‘the chaotic expansion of capital.’ But it’s also trying to make it easier for some companies to go public. In February, China’s market regulator announced that the exchange would adopt a registration system. ipoThis eliminates the tedious official review process. The result was a slew of new tech sector listings on the stock market in March and his April. Stock prices soared on the first day of trading, often more than doubling.

One green energy investor said there was no question that a new bubble was being created in emerging industries. This is considered acceptable at this time as it is in line with government policy. State-backed startups face few hurdles.State influence over capital markets — from seed funding ipos—means it has become easier for companies with the right connections to catapult through the fundraising process. But it’s unclear whether these companies have the best tech chops, investors say.

Foreign investors remain skeptical. One banker working with a foreign private equity group said some investors said regulators could easily turn on the industry if speculation seemed to get out of hand. He said he was afraid. Peer-to-peer lending had strong government support before it collapsed in 2018. Another more recent example is related to Chat.gptThe Chinese government shows great support for China’s domestic policies Love industry.However, the recent global epidemic LoveChatbots powered by Yahoo have led regulators to crack down on the region. On April 11, the country’s cyber regulator announced that a security review of these companies would be required. As long as there is a bubble, the crackdown will continue, even if it is backed by the government.

https://www.economist.com/business/2023/04/24/how-to-make-it-big-in-xi-jinpings-china Xi Jinping’s way of getting big in China

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