Chinese startups embrace new opportunities for high-quality development

A robot poses during the 2024 China International Fair for Trade in Services (CIFTIS) at the China National Convention Center in Beijing, capital of China, Sept. 12, 2024. [Xinhua/Zou Guangping]

-- In recent years, tech-driven startups like Galbot have been growing fast across China. In Beijing alone, an average of 337 new tech companies were established daily in 2023, or a jaw-dropping one tech company every five minutes.

-- The Chinese government has implemented a series of measures to promote entrepreneurship and innovation, which provide policy support for the VC industry, encouraging social funds to invest in startups and become "patient capital."

BEIJING -- Founded here in May 2023, Galbot is a cutting-edge startup building robot with embodied artificial general intelligence. In just over a year, it has developed a globally leading grasping technology with a 95-percent success rate for objects of any material and stacking configuration.

Venture capital (VC) has significantly supported Galbot's rapid development. As of June, the company had completed an angel round of financing amounting to approximately 700 million yuan (99.75 million U.S. dollars), setting a record in the embodied intelligence sector in China this year. In July, Hong Kong Investment Corporation also became an investor.

The company is a microcosm of how VC has been accelerating the development of startups across China. Many of these startups leverage venture financing to achieve fast growth and success. With the Chinese government carrying out a raft of policies to promote entrepreneurship and innovation, startups in China are embracing new opportunities for high-quality development.

VC FUELING STARTUP GROWTH

Investing in early-stage projects comes with greater risks, especially for hi-tech startups, which often require high research and development investments and a prolonged period before receiving a return on investment. Nothing is guaranteed. However, startups like Galbot, which possess cutting-edge technologies, can still easily attract investors' attention in China.

"Our company has strong technical capabilities and has effectively integrated industry, university and research institute. The financing process has also gone smoothly, with many investors not only providing funds but also introducing valuable industry resources to us, which has greatly aided our growth. This gives us confidence in our future operations," said Wu Wentao, media cooperation manager of Galbot.

Galbot's angel round financing amount is impressive, with diverse investors, including well-known VC funds, industry investors, and private capital. The largest investment in the company's angel round came from Meituan, one of China's leading online services platforms known for its army of yellow-clad food delivery workers. By the end of this year, Galbot will begin application testing for a 24-hour unmanned operation scenario developed in collaboration with Meituan.

"This year, our company's products are primarily focused on two areas: first, creating unmanned commercial application scenarios, and second, expanding into the industrial sector, such as conducting tests in car factories and manufacturing plants," said Wu.

Journalists interact with a bionic humanoid robot at the Zhongguancun International Innovation Center, venue for the 2024 Zhongguancun Forum (ZGC Forum), in Beijing, capital of China, April 24, 2024. [Xinhua/Chen Zhonghao]

In recent years, tech-driven startups like Galbot have been growing fast across China. In Beijing alone, an average of 337 new tech companies were established daily in 2023, or a jaw-dropping one tech company every five minutes. Additionally, the total revenue of enterprises in Beijing's Zhongguancun hi-tech zone, where Galbot is located, increased from 3.6 trillion yuan (512.93 billion dollars) in 2014 to about 8.6 trillion yuan (1.22 trillion dollars) in 2023.

"From my experience in China, I can still see strong startups raising money," said Steve Hoffman, chairman and CEO of Founders Space, a global innovation hub for entrepreneurs, corporations and investors. "I was at the opening of the new Hong Kong University Techno-Entrepreneurship Center in Shenzhen, and I saw some strong startups, especially in medical tech and AI. Some of these companies had already raised capital at an early stage."

Hoffman also visited Quanzhou in coastal Fujian Province last month and met with 300 entrepreneurs in traditional industries such as clothing and shoe manufacturing. "Their businesses are still profitable, and they have many strong overseas relationships. They are optimistic about the future and their potential to leverage new technologies, like AI," he said.

CONSISTENT POLICY SUPPORT

The Chinese government has implemented a series of measures to promote entrepreneurship and innovation, which provide policy support for the VC industry, encouraging social funds to invest in startups and become "patient capital" -- funds that focus on long-term investment with a greater tolerance for risk. It also strives to establish channels that connect VC with innovative projects.

At the subnational level, Beijing has established four government industry investment funds, each exceeding 10 billion yuan (1.42 billion dollars), focusing on AI, healthcare, robotics, and information technology. These funds are primarily aimed at enhancing innovation and entrepreneurship and supporting early and small investments.

A visitor experiences an AI-driven native language communication device during the 21st China-ASEAN Expo at Nanning International Convention and Exhibition Center in Nanning, south China's Guangxi Zhuang Autonomous Region, Sept. 25, 2024. [Xinhua/Zhang Ailin]

Meanwhile, Shanghai has set up a fund for startups in pioneering and key industries. Each startup can receive up to 5 million yuan (712,408 dollars) in guaranteed loans.

According to data released by China's State Administration for Market Regulation in March, there were 32.73 million newly established business entities in China last year, marking a 12.6-percent increase year over year. This included 10.029 million new enterprises, a growth of 15.6 percent, and 22.582 million new individual businesses, up 11.4 percent.

Fu Jun, a startup guidance expert in Shanghai and president of Shanghai AAT-YunKun Investment, said that in the Yangtze River Delta alone, numerous serial entrepreneurs are constantly "testing" their ideas in their fields until they find a sustainable path.

"Startups inevitably diversify into related upstream and downstream business lines. When one line proves unsuccessful, they may close it by deregistering a company or pivoting to new ventures," Fu said. "The characteristic of startups is that they can 'turn quickly.' ... True entrepreneurs will continuously seek out opportunities."

INVESTMENT HOTSPOT

Global foreign direct investment (FDI) fell by 2 percent to 1.3 trillion dollars in 2023 amid an economic slowdown and rising geopolitical tensions, according to the World Investment Report 2024, published by the United Nations Conference on Trade and Development.

"The funding cycles of startups are cyclical. At certain times, capital is abundant, and economic conditions are extremely favorable. Other times, capital becomes less available, and economic conditions are less conducive to taking risks. We are in that cycle right now," said Hoffman.

People watch a robot dog demonstration at an exhibition during the 2024 World Computing Conference in Changsha, central China's Hunan Province, Sept. 24, 2024. [Xinhua/Chen Zhenhai]

Despite a complex and challenging international environment, China's economy continues to show resilience and remains an attractive destination for foreign investment. This reflects confidence in China's economic outlook and represents a strategic choice for those seeking high-quality investment opportunities.

Taking Shanghai as an example, the financial sector is a key area for attracting foreign investment. Since 2022, the city has established 42 new foreign financial enterprises, with actual investments (including capital increases) totaling 2.27 billion dollars, accounting for 3.8 percent of the city's total foreign capital utilization.

This year, foreign financial institutions have continued to increase their investments in Shanghai, with actual foreign capital utilization in the financial sector reaching 480 million dollars from January to July, a year-on-year increase of 28.6 percent. Currently, there are nearly 600 licensed foreign financial institutions in the city, representing almost one-third of the total number of financial institutions in Shanghai.

China moved up one spot to 11th place in the ranking of the world's most innovative economies, making it one of the fastest risers over the past decade, according to the Global Innovation Index 2024 released by the World Intellectual Property Organization last month.

"China's commitment to high-quality development is very encouraging. I'm sure investment will continue in the future," said Bill Anderson, CEO of Bayer AG, expressing his confidence about China's long-term development and great potential in the Chinese market. "The Chinese economy showed good resilience," he noted.

"China is transforming from a consumer market into a center of knowledge and innovation," said Stefan Hartung, chairman of Robert Bosch GmbH. Bosch, he noted, plans to continue making long-term investments in China to meet rising market demand.

As a frequent traveler to China, Hartung has gained deep insights into the Chinese market. "China is a very important market for us," he said. "We have achieved significant success, and our investments continue to grow."