Chinese investments into US startups soared by an astounding $3.6 billion last year, beating the previous record of $2.8 billion in 2015, according to Rhodium Group, a New York-based economic research firm, in spite of the US penalizing telecom majors Huawei and ZTE on charges of espionage.
The US introduced a new law last year, called FIRRMA, extending the powers of the Committee on Foreign Investment in the United States (CFIUS) to probe transactions and foreign investments in US startups.
Chinese venture funds are anticipated to have invested about $14 billion in US startups since 2000 with the bulk of the deals coming through in 2014 and about 40 percent of them in biotechnology and pharmaceutical companies. But now, Chinese VC funds are steering clear of new investments even as they find it impossible to gain approvals to pump funds in US companies building sensitive technology. Also, the ongoing economic slowdown has led to some VC firms cashing out and a few others scaling back on their overseas investments. All in all, the new law is not only expected to drive away Chinese investors but could have an alarming impact on futures investments into US startups.