China emerges as a hub for 369 unicorns; AI and semiconductor sectors lead

Chinese unicorns command an impressive average valuation of US$3.8 billion, with AI unicorns leading the pack at an average valuation of US$6.76 billion

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China has consolidated its status as a hub for technological innovation, now home to 369 unicorns. A unicorn is a privately held startup valued at over $1 billion. More than a quarter of these 369 Chinese unicorns are engaged in the country's booming artificial intelligence (AI) and semiconductor industries, according to a report.

The report was released jointly by five prominent institutions, including the professional services firm KPMG, the Zhongguancun Unicorn Company Development Alliance, and the consultancy Great Wall Enterprise Institute. It was unveiled at the annual Zhongguancun (ZGC) Forum, which concluded on Monday in Beijing.

The report stated that these Chinese unicorns boast an impressive average valuation of $3.8 billion. AI unicorns are at the forefront with an average valuation of $6.76 billion, closely followed by financial technology firms at $6.57 billion. Notably, the AI and semiconductor sectors represent 14.1 per cent and 12.2 per cent, respectively, of the total 369 unicorns.

Despite China's significant growth in unicorn numbers, the country still lags behind the United States in the overall count. Last year's global figures, revealed in the Global Unicorn Index 2024 by the Hurun Research Institute, showed over 700 unicorns in the US and more than 340 in China.

The report also details the geographical distribution of unicorns across China, with Beijing leading with 114 unicorns, followed by 63 in Shanghai and 32 in the technology hub of Shenzhen in southern Guangdong province.

The increase in unicorn numbers within China coincides with a downturn in initial public offerings (IPOs) in major financial markets such as Hong Kong, Shanghai, and Shenzhen. Several companies have postponed their listing plans, including Alibaba Group Holding, which recently shelved the listing of Cainiao Smart Logistics Network.

Moreover, the report highlights the significant role of Chinese Big Tech companies in nurturing unicorns, with 25 of them incubated by industry giants such as Tencent Holdings, Alibaba, and Baidu.

Despite the domestic support, over 70 per cent of Chinese unicorns have attracted investment from international funds, underscoring their global appeal, the report added.

Established venture capital firms have been crucial in funding Chinese unicorns, with notable names like HongShan (formerly Sequoia Capital China), Citic Capital, and Tencent playing key roles.

However, the escalating geopolitical tensions between the US and China potentially threaten future fundraising efforts for Chinese startups. Measures such as the executive order signed by US President Joe Biden restricting American investment in sensitive technologies in China, coupled with congressional investigations into venture capital firms' investments in key sectors, could create challenges for Chinese unicorns in the near future.