The Hong Kong Inventory Alternate mentioned that for the primary time, six gongs crammed its essential corridor on July 9, 2025, as 5 corporations and an ETF marked their listings.
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This report is from this week’s CNBC’s The China Connection publication, which brings you insights and evaluation on what’s driving the world’s second-largest economic system. Every week, we’ll discover the largest enterprise tales in China, give a lowdown on market strikes and aid you arrange for the week forward. Like what you see? You’ll be able to subscribe right here.
The large story
There is a murmur of pleasure in China’s enterprise capital circles as of late: overseas buyers are beginning to return with U.S. {dollars}.
It is a results of DeepSeek’s AI disruption, coupled with a buoyant Hong Kong IPO market on observe to surpass Wall Road this 12 months because the world’s largest by cash raised. Beijing’s alerts to assist companies in latest months have additionally helped.
The Dangle Seng Index’s surge of over 20% up to now this 12 months displays near-term optimism. One other signal comes from phrase of Chinese language enterprise capital corporations elevating U.S. dollar-denominated funds once more, after a dry spell through which the VCs needed to flip to native buyers with Chinese language yuan funds.
Beijing-based BAI Capital mentioned it began elevating for a brand new $800 million fund in February and plans to shut the preliminary spherical in September. The agency is supported by German international media conglomerate Bertelsmann Group.
BAI mentioned it is seen “robust curiosity” for the U.S. dollar-denominated fund, which it can then use to put money into China-based corporations. Thus far, the agency has already invested in 10 corporations that plan to go public within the subsequent one to 2 years.
Future Capital Discovery Fund, an early backer of high-flying electrical automotive startup Li Auto, advised me it raised a report $210 million for a U.S. dollar-denominated flagship fund within the second half of final 12 months.
“As soon as there’s a fundraising window, we should rapidly seize the chance to boost funds,” Mingming Huang, founding companion at Beijing-based Future Capital, mentioned in Chinese language, translated by CNBC. “That is very totally different from the long-standing apply of elevating U.S. {dollars} from the market each few years.”
“Now we should be very delicate to macro developments, particularly the path of relations between main economies,” he mentioned. The agency, which counts buyers together with sovereign wealth funds and endowments from the Center East, U.S., Europe, Japan and Southeast Asia, has plans to deploy capital for AI brokers and {hardware}.
Nevertheless it’s been a troublesome few years for China VCs and their restricted companions.
Within the VC world, a agency raises cash from a spread of “restricted companions,” which embody sovereign wealth funds, pension funds, college endowments and household workplaces. Whereas getting paid to handle the fund, the VC then chooses startups to again, reaping a reward from the businesses’ IPOs that’s shared with the restricted companions.
The fallout round Chinese language ride-hailing firm Didi’s New York IPO in June 2021, on the eve of the ruling Chinese language Communist Get together’s 100th anniversary – regardless of a number of warnings from Beijing about knowledge privateness breaches – didn’t sit properly with regulators on either side of the ocean. Didi was backed by a protracted record of outstanding buyers throughout quite a few funding rounds, together with Apple, SoftBank and Sequoia Capital.
China would later increase the bar for its corporations eager to record abroad, whereas Washington ramped up its scrutiny of U.S. capital heading to China, dampening fundraising exercise on the mainland, notably for cross-border investments.
Notably, Sequoia Capital China break up off from its U.S. father or mother in 2023 and rebranded beneath HSG. Individuals acquainted with the matter advised me that the corporate shouldn’t be in a fundraising cycle and nonetheless has ample dry powder to gasoline its runway for years to return.
Different VCs which have spun off or restructured their China arms embody GGV Capital, which turned Granite Asia, and California-based Matrix, which rebranded its Chinese language operations as MPCi final 12 months.
An eye fixed on ByteDance
Not the whole lot is identical because it was within the pre-Didi IPO years.
Relatively than giving cash to a enterprise capital agency, many restricted companions primarily based in Europe, the Center East and Asia favor to instantly purchase possession stakes in personal corporations corresponding to Chinese language web giants ByteDance and Xiaohongshu, mentioned Hope Xu, a enterprise capitalist. She left Supply Code Capital final 12 months to begin her personal agency, known as Density 590, specializing in such offers, often known as secondaries, which embody single-asset gross sales and stakes in funds.
Regardless that the Beijing-based TikTok father or mother is not publicly listed, the demand for its shares is so excessive that they’re basically as straightforward to liquidate, or promote, as they might be on a publicly listed trade, she mentioned. Whereas the sellers are inclined to largely come from the U.S. and Asia, Xu mentioned the consumers usually come from the EU, the Center East or Asia.
It is a large alternative for returns.
ByteDance’s valuation has surged from $245 billion initially of this 12 months to $340 billion, she mentioned Tuesday, noting that buyers are beginning to settle for the uncertainty of the U.S.-TikTok divestiture.
ByteDance declined to touch upon its valuation.
The corporate has turn into a quiet power in China’s web realm. In addition to proudly owning a well-liked Chinese language TikTok equal known as Douyin — which surpassed JD.com final 12 months to turn into the second-largest ecommerce platform by product sales — ByteDance has additionally developed a well-liked AI chatbot known as Doubao, together with an AI agent platform named Coze.
Xu identified that for tech investments corresponding to AI and robotics, the assets and capital wanted are huge, making it troublesome for smaller startups. Shopping for a stake in a giant firm, corresponding to ByteDance, with its various product strains, is actually like shopping for an AI exchange-traded fund, she mentioned.
For instance, Tencent shouldn’t be solely growing its personal AI fashions and purposes, but additionally investing in AI startups. It reported a virtually five-fold surge in income from its enterprise associates and joint ventures final 12 months, rising from 5.8 billion yuan to 25.2 billion yuan over 12 months, in response to the corporate’s annual report.
International ambitions
The China VC world can also be not simply centered on the home market.
Citing the macroeconomic surroundings and tech developments, BAI Capital mentioned its investments will probably be break up between native and abroad startups. Half of its funds will go in direction of China-based corporations trying to broaden worldwide in fintech, leisure, AI and provide chains, whereas the opposite half of its funds will give attention to shopper, healthcare and expertise alternatives in China, BAI mentioned.
Since 2019, BAI mentioned it has invested in a number of rounds in Stori, a digital financial institution in Mexico with 3.6 million bank card customers and a couple of.4 million depositors. “We consider Stori’s success shouldn’t be an remoted case.”
The query is how lengthy these VCs and their restricted companions can stay enthused. The Hong Kong Inventory Alternate final week proudly introduced its busiest day for IPOs and ETF launches so far: with six gongs on stage.
High TV picks on CNBC
James Peng, CEO of autonomous driving firm Pony AI, talks about Uber founder Travis Kalanick’s potential curiosity in buying the corporate’s US operations.
Louise Bathroom, head of Asia economics at Oxford Economics says that whereas China’s financial progress is more likely to gradual within the second half of 2025 because of the ‘spectacular progress engine’ of exports ceasing to supply the identical impetus, there’s a silver lining in the truth that demand for items from China’s superior manufacturing sector aren’t simply substitutable and would stay comparatively resilient regardless of tariffs headwinds.
Angela Stent, senior fellow at Brookings Establishment, says Russian President Vladimir Putin counted on Chinese language President Xi Jinping’s assist when he invaded Ukraine – and continues to depend on Beijing’s financial assist and diplomatic assist on a worldwide stage.
Must know
Within the markets
Mainland China and Hong Kong shares are blended on Wednesday amid blended buying and selling within the area, as buyers assessed U.S. President Donald Trump‘s assertion of getting reached a preliminary commerce cope with Indonesia.
Mainland China’s CSI 300 was down 0.35%, whereas Hong Kong’s Dangle Seng Index — which incorporates main Chinese language corporations — had gained 0.15% as of 1:12 p.m. native time. The mainland benchmark is up round 1.8% 12 months so far, knowledge from LSEG confirmed.
The efficiency of the Shanghai Composite over the previous 12 months.
Arising
July 21: Individuals’s Financial institution of China month-to-month determination on benchmark mortgage prime charge
