China’s Growing Cleantech Ecosystem and Venture Investments

Leo Zhang

When it comes to combating climate change, China is stepping onto center stage and taking a leading position to reduce its carbon footprint. At this year’s 19th Communist Party Congress, Chinese President Xi Jinping proclaimed that by “taking the driving seat in international cooperation to respond to climate change, China has become an important participant, contributor, and torchbearer in the global endeavor for ecological civilization.” In parallel, he also emphasized technology innovation as an integral part of the country’s path forward.

Not surprisingly, China’s domestic venture capital investments in technology innovation have been flourishing over the past few years. According to China Money Network, China’s top ten most active venture capital and private equity firms have collectively invested over $22 billion over 460 deals in 2017, nearly doubling the 2016 figure at $12 billion. This figure, of course, represents the broader technology sector rather than dedicated cleantech sectors.

From our own observations and data, there is a similar trend in China’s growing domestic cleantech investments. In 2017, there were two major investment themes worth highlighting, autonomous vehicles and artificial intelligence, that attracted large funding rounds from top tier Chinese venture investors. Our chart below shows a sample list companies that have raised significant rounds in 2017.

One notable observation throughout this year is the growing number of Chinese domestic companies attracting venture funding. The notion that China is a manufacturing hub that lacks technology innovation is no longer the case. In fact, Chinese startups are competing head on against their Western counter parts, often at a much faster development cycle. Hans Tung, a Managing Partner at GGV Capital, recently commented during an interview with Fortune that “startups in China grow at a faster pace the first three to five years than they do in the US. It’s not uncommon to see Chinese teams working from 9 a.m. to 9 p.m, six days a week.”

In addition to a thriving fundraising landscape, China’s entrepreneurial supporting ecosystem is also growing, as evidenced by the sheer number of incubators and accelerators that have emerged throughout the country. Yema Financial recently published data showing the number of Chinese incubators has reached more 2,530 in 2015, and we can expect the number to have grown since then.

Join our lunch session at our upcoming Cleantech Forum San Francisco (January 22-24, 2018) to learn more about what might China’s New Energy vehicle transportation market look like.