Internet & tech companies hopeful for better

China’s internet and technology companies are starting to feel the effects of a cooling economy as private funds that have invested in these sectors face increasing difficulty in their fund-raising efforts.

Last year, internet and technology companies as well as private equity and venture funds; were hit by falling availability of capital, volatile stock markets and tighter regulations.

These challenges came amid a slowing economy and nation wide financial deleveraging campaign that resulted in banks cutting down on off-balance sheet lending that had been a major source of capital for these funds in the past.

Last year, a total of RMB 870 billion was raised among 2,700 funds, falling by more than 30% from 2017. Yuan-denominated funds last year had been hit by domestic fluctuations and regulations, making it difficult for private funds to raise money.

Most of the yuan-denominated funds last year that managed to raise more than RMB 5 billion were either backed by the government or state-owned enterprises.

However, there are hopes that this year may be different after the Chinese central bank has introduced about RMB 800 billion worth of liquidity into the financial system to encourage more lending by financial institutions to small and private businesses.