Turning the Corner to a New Normal: China's PE/VC Sector in 2022

Summary

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• 2022 was a year of transition for China's PE/VC sector
• Key legislative changes in 2022 included the cross-border data transfer rules, the new antitrust law, and continued integration between the Hong Kong and mainland Chinese capital markets
• 2023 is expected to provide further certainty into a new normal as China emerges from the pandemic

2022 was a year of transition in China's private equity/venture capital (PE/VC) sector.  The sector continues to be impacted by geopolitical uncertainties between China and the U.S.  However, behind the scenes, China's domestic PE/VC market continued to develop in 2022.  Our observation is that while the aggregate number of transactions in China's VC market declined in 2022, in emerging technology areas such as new energy, the market was actually more active than in previous years.  For example, listings on stock exchanges in mainland China numbered nearly 400, and accounted for nearly USD$100 billion in proceeds, which was nearly half of all proceeds raised worldwide in 2022.  There continued to be integration between the Hong Kong and mainland Chinese capital markets, with the expansion of the stock connect for joint primary listed companies in Hong Kong and proposed Chapter 18C rules of the Stock Exchange of Hong Kong, which proposes to expand listing options for specialist technology companies in high-tech sectors.

Regardless of geopolitical uncertainties, China's PE/VC market remains open for business to foreign investors, exit opportunities will still exist, and the market may stabilize as the PRC emerges from the pandemic