GGV Capital, a U.S. venture capital firm that has backed companies such as Airbnb, ByteDance and Alibaba, announced on Thursday that it plans to separate its business into two entities, one focusing on Asia and the other on the U.S., amid increasing political pressure on American companies to limit investments in Chinese technology.
GGV Capital to create two independent firms
The move follows a similar decision by Sequoia Capital in June, which split its businesses in China as well as India and Southeast Asia into two independent firms. GGV Capital said the separation of its Singapore arm that would solely focus on investing in China is expected to finish by the first quarter of next year. The new firm will adopt its own brand and operate independently from GGV Capital.
GGV Capital, which has around $9 billion in assets under management, said the split will allow it to better serve its portfolio companies and investors in different markets. The firm said it will continue to invest in both the U.S. and Asia through its existing funds, but will not raise new funds for cross-border investments.
US pressure on China investments
The decision by GGV Capital comes amid increasing political pressure on American companies to limit their exposure to Chinese technology, especially in sectors such as artificial intelligence, biotechnology and semiconductors. The U.S. government has imposed sanctions and restrictions on several Chinese companies over national security and human rights concerns, as well as allegations of intellectual property theft and unfair trade practices.
In July, a U.S. congressional committee launched a review of American firms over their funding of Chinese technology companies, according to the Wall Street Journal. The committee reportedly sent letters to several venture capital firms, including GGV Capital, GSR Ventures, Walden International and Qualcomm Ventures, asking them to disclose their investments in China and their compliance with U.S. laws and regulations.
China’s crackdown on tech sector
Meanwhile, China has also tightened its regulatory grip on its own tech sector, launching a series of probes and crackdowns on various industries, such as e-commerce, fintech, education and gaming. The Chinese government has cited reasons such as anti-monopoly, data security, consumer protection and social stability for its actions.
The regulatory onslaught has wiped out billions of dollars in market value for some of China’s biggest tech companies, such as Alibaba, Tencent and Didi Chuxing. It has also dampened the appetite for foreign investors to pour money into China’s tech sector, which was once seen as a lucrative and fast-growing market.
According to data from Preqin, China-focused firms only raised $5.5 billion in U.S. dollar-denominated funding in the first half of the year, a far cry from its peak of $27.6 billion raised in the same period in 2021.
