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China gets record US$31b in venture capital investment in 2016 despite global woes

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[HONG KONG] Megadeals in China helped bring a record US$31 billion in venture capital investment into the country in 2016 despite a sluggish global economy and a sharp drop in the number of new deals, a report showed on Friday.

Venture capital investment in China rose 19 per cent to account for around a quarter of the global total of US$127 billion last year, even though the number of deals declined 42 per cent to just 300, according to KPMG's quarterly report on global VC trends.

China saw its two biggest deals for the year in the first half of 2016: US$1.2 billion in funding for peer-to-peer lending platform Lufax and Apple's US$1 billion investment in taxi-hailing app Didi Chuxing.

Despite cautious investor sentiment shown in a 9.4 per cent drop in global investment value and a 24 per cent slide in deal count in 2016, average investments in China are getting bigger and bigger.

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The deal count in China has more than halved over the past three years but investment has tripled from US$12 billion in 2014. Beijing alone has attracted US$37.3 billion of venture capital since that year, including US$18.5 billion in 2016.

The strong performance in China is expected to continue in 2017 with artificial intelligence, where investment is "growing by the day", a new focus for investors, KPMG said.

It also said Chinese outbound VC investment, especially in the US, is expected to grow at a solid pace driven by Chinese companies' desire to acquire technologies for use in the home market. "Investors in Asia are shifting their investment focus,"said Philip Ng, Partner and Head of Technology, KPMG China.

Artificial intelligence, robotics and big data are replacing online-to-offline to be what is grabbing investing attention, while there is also increased focus on fintech, education and healthcare related startups, he said.