3.2 Chinese venture capital investment in Europe more than doubles
2021 also saw pronounced growth in Chinese venture capital investment in Europe, in line with Europe’s total VC investment growth, which increased by 120 percent to just over EUR 100 billion. Levels of Chinese VC investment more than doubled in 2021, to EUR 1.2 billion. These remain way below levels of China’s VC investment in the United States, which stood at EUR 2.9 billion in 2021, but marked a sharp uptick.
These investments were strongly concentrated on a handful of countries. Half went to Germany (EUR 597 million), followed by the UK (EUR 230 million) and then Sweden (EUR 121 million).
Quite predictably, investments focused on high-tech start-ups in rapidly growing sectors. Top transactions included Tencent’s participation in funding rounds for German B2B payment provider Billie (for an estimated EUR 166 million) and for German on-demand grocery deliverer Gorillas (for EUR 158 million).
The Chinese wealth fund CIC Capital also contributed EUR 99 million of a EUR 2.3 billion funding round for Swedish EV battery maker Northvolt. Chinese VC investment in the UK was characterized by a large number of small transactions. The biggest included Tencent’s EUR 50 million investment in medtech company CMR Surgical and Ping An Insurance’s EUR 38 million investment in 10x Future Technologies Services.
The uptick in China’s VC investment in Europe was likely also influenced China’s tech and industrial policies of 2021. Last year, Beijing cracked down heavily on edtech, crypto and gaming as well as big tech giants more generally, which curtailed domestic opportunities and likely pushed Chinese investors to pursue VC opportunities abroad (such as Hillhouse Capital’s investment in French gaming firm Sorare SAS for EUR 38 million).
At the same time, Beijing’s promotion of sectors like robotics and medtech might have encouraged related VC investment overseas. Several Chinese investors in fact poured capital into Sino-German start-up Agile Robotics.
The rise in China’s VC investment in Europe might finally be explained by comparatively low levels of scrutiny around VC flows in Europe (compared to M&A and greenfield FDI). In contrast to large acquisitions, small VC deals might fly under the radar due to the speed of deal making, level of technological complexity, and often limited shareholding taken (below 10 percent).
The United States started screening certain VC investments in 2018 and, in 2020, India restricted incoming Chinese investment, including venture capital. The EU’s investment screening regulation allows member states to screen below the 10 percent threshold, but many member states still need to implement such guidance into their own mechanism and screening practices.