Sequoia Capital China is close to raising nearly $9 billion to invest in cash-strapped Chinese start-ups amid concerns over Beijing's zero-Covid policies, a crackdown on technology groups, and heightened geopolitical risk, the Financial Times reports. The fundraising was oversubscribed by 50%.
The Sequoia Capital affiliate has backed several leading Chinese tech companies, including TikTok owner ByteDance, e-commerce juggernaut Pinduoduo Inc PDD, and delivery group Meituan MPNGY.
Global investors essentially pulled back from China funds in 2021 over regulatory uncertainties after an extended regulatory crackdown by Beijing kicked off with the squashing of Alibaba Group Holding Limited BABA fintech affiliate Ant Ltd IPO.
The crackdown ravaged the valuations of listed tech groups and suspended multiple China and U.S. initial public offerings.
A Beijing-based investor acknowledged that while many sovereign wealth funds, American university endowments, and pension funds had halted China investments this year, the largest and broadest investment funds like Sequoia China and Hillhouse were still raising money.
"Only Sequoia and Hillhouse can raise money from international investors right now, they see it as lower risk, like making an index fund investment," the investor said.
However, the investments have a lock-up period of five to 10 years or longer in an increasingly uncertain geopolitical environment mainly triggered by Russia's invasion of Ukraine.
China-focused funds have struggled to convince global investors to buy in this year, raising just $4.8 billion in the first six months of 2022, down about 94% year on year, marking the lowest half-year haul since 2009 during the global financial crisis.
DZ Bank AG's Manuel Muehl touted as Alibaba's most accurate analyst, remained adamant on his sell recommendation on Chinese stocks, including Alibaba, despite China's assurances of support towards the sector.
Contrastingly JPMorgan reversed its stance on the Chinese tech sector, which saw the bad news already priced into Chinese equities. It expressed optimism over the policy makers and the central bank, further easing the monetary policy.
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