Chinese tech fundraisings head for first slump in seven years

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China and India might not have locked into a trade war like scenario like how the former locked its horns with America.

It is even doubtful that China ever considered India as an opponent in the economic sphere, as it only saw America as a worthy opponent. But that may be changing as India seems to rise as a serious contender for China, because of its fault.

For the last few months, the Chinese authorities have been cracking down on their domestic tech companies. From stepping up certain measures to the scrutiny of the company’s IPO in foreign markets.

All this restraining over these companies shows the Chinese authorities desire to have total control over this sector which is one of many main drivers of their economy. It has inflicted them with serious economic injuries, but the authorities seem not to care.

This is seen in the case when the tech start-ups’ public listing for fundraising faced their first annual drop in seven years. The IPOs have collected $14bn this year, trailing 2020’s total of $2.3bn. At this time, the bankers move into this quiet period for deals.

Meanwhile India, the IPO has collected $2.6bn this year. It jumped by 550% compared to that of last year’s. That was before the IPO of Paytm, which analysts expect to bring in a whopping $2.5bn this week.

This gap of fundraising between the two itself is an example of China’s head start in encouraging an ecosystem of domestic tech champions.

The Indian side seems to be bright, as seen in the record sales of shares, which is also a sign of a maturing market. Even new regulatory changes seem to encourage small and unsuccessful start-ups to find a fresh footing in the market.

The new regulations first test came when Zomato listed for an IPO and collected $12bn. Being the first big tech IPO, it collected double its issue price.

Meanwhile, in China, the new changes depressed share prices and unsettled investors including those favoured by the state.

Wong Kok Hoi, the founder of APS Asset Management, has said that international investors will understand that these companies will find it hard to make the profit they made in the past.

If they find it even bleaker, the investors will flock to the alternative, India.

Many Indians like Bhavish Aggarwal, the chief executive of Ola, have asked his fellow entrepreneurs to take advantage of this condition and allure assets worldwide.

According to analysts and strategists, many factors have burdened the Chinese shares sale.

It includes the poor performance of domestic stocks and the tough enforcement of listing requirements. CSI 300 index, China’s benchmark for listed stocks, fell 6% this year.

Then the crackdown by the authorities has scared investors from any new listings. Its consequences include the failure of Megvii‘s IPO. The sad part is, other major tech groups are public.

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