China’s Tech Capital Winter Deepens After VC Deals Tank

China-focused venture capital firms struggled to raise capital in the first half, culling the number of funds and presaging more pain to come for the country’s cash-strapped startups.

Funds that invest in the world’s No. 2 economy only managed to raise $3.7 billion as of June 15, down nearly 60% from a year earlier, according to research consultancy Preqin. The number of Chinese-focused vehicles that managed to complete their funding also fell 61% to 21 in that period. That helped slash the total number of existing Chinese-based venture capital funds by more than half to 345 as of mid-June, Preqin data showed. The total amount of deals stood at about $20 billion at half time, roughly 40% of 2019’s full-year total.

Investment activity in an industry that thrives on face-to-face contact has fallen off a cliff since the epidemic erupted in January. Tensions between Beijing and Washington has also fomented uncertainty across different sectors, as U.S. lawmakers call for curbs on investment from pension and endowment funds. That may jeopardize a swath of the millions of startups that collectively represent an important growth driver for the country.