Newsletters: What's next for PE in China?

What's next for PE in China?

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The Weekend Pitch

October 23, 2022

Presented by Masterworks

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(Jenna O'Malley/PitchBook News)

With the end of China's 20th Communist Party Congress in Beijing, there are signs that a more insular country is emerging—it's a worrying development for private equity, an asset class that thrives on international cooperation.

Chinese premier Xi Jinping used the event to confirm his unprecedented third term. He has used his power to expand state control of the economy and crack down heavily on parts of the country's giant tech sector. He has also, it appears, begun to turn his country inward, emphasizing economic self-reliance and asserting China's national interests on the global stage.

At the same time, the influence and power of China's private sector has declined. According to reports, significantly fewer executives from private groups were invited to this month's congress compared with previous years.

These are unstable times for China. The unraveling of the country's real estate sector has triggered a financial crisis years in the making. Meanwhile, a zealous commitment to its zero-COVID policy, enforced by regional lockdowns and travel bans, has been ruinous for the country's fortunes. This month, the International Monetary Fund downgraded China's growth forecast for next year to 4.4%. There is no indication that China will loosen the policy.

During this turbulent time, there are signs that PE's love affair with China may be waning. Both deals and fundraising activity have fallen from recent peaks—the country that is the jewel in Asia's PE crown has lost some of its sparkle. China will still play a big role in the future of private equity in the region but the nature of that role, and the extent of state's involvement, may change.

I'm Andrew Woodman, and welcome to The Weekend Pitch. You can reach me at andrew.woodman@pitchbook.com or on Twitter @adwoodman.

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TechCrunch Disrupt

(Andre_K/Shutterstock)

One might have expected a more somber mood at this year's just-concluded TechCrunch Disrupt tech conference in San Francisco. After all, the startup world has experienced a sudden fall from funding euphoria.

Instead, the industry's rose-colored outlook was everywhere. There were, of course, nods to "the current environment" and what that means for founders. But overall, the shoot-for-the-moon attitude has barely waned. Serial entrepreneur Marc Lore talked up his latest startup, Wonder, which promises to prepare meals (read warm up previously cooked food) in a van parked outside the customer's home. And some VCs spoke of the virtues of winning deals by direct messaging with founders over Twitter.
—James Thorne

Call in the ghostwriters

(Gunnerchu/Shutterstock)

If you were a venture capitalist, would you pay somebody $200,000 a year to write your tweets? An anonymous tech entrepreneur was hired to do just that, according to an "as told to" story earlier this week by Insider that sparked much debate—on Twitter, of course.

But why would VCs even place such a high value on their social profile? Start with the crowded marketplace. It's an increasingly abundant capital environment, with almost $151 billion in VC funds raised in the US this year, compared with $23 billion a decade ago, according to the Q3 2022 PitchBook-NVCA Venture Monitor. Fund formation has exploded to 1,139 funds closed last year vs. just 314 in 2012. In that competitive landscape, perhaps it's little wonder that some VCs would be keen to have professional help getting noticed in Twitter's virtual town square. —Alexander Davis

Research traction

Here's a list of some of the most downloaded research reports from PitchBook analysts released during the third quarter:

This edition of The Weekend Pitch was written by Andrew Woodman, James Thorne and Alexander Davis. It was edited by Chris Noble and John Moore.

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