China Serious about Fintech with $1.44 Billion Investment
China has made it loud and clear it intends to position itself as a global fintech leader. A group of state and privately held companies launched a $1.44 billion investment fund called the Asia FinTech Merger and Acquisition Fund of Funds (Asia FinTech FoF). The fund will focus on fintech mergers and acquisitions, and “nurture” initiatives in the fintech industry, according to a Dec. 28 announcement by Credit China FinTech Holdings Ltd., which led the investment.
“Leveraging on the fund partners’ experiences and competitive advantages in brand recognition, industry resources and expertise, the fund aims to invest in innovative fintech enterprises with potential, and help them to be fintech leaders with our technical know-how and capital resources,” said Sheng Jia, executive director of Credit China FinTech. Other investors in Asia FinTech FoF include China Huarong International, Shanghai Xinhua Publishing Group and Jilin Province Investment Group.
Fintech-related investment is flourishing in China, increasing $8.8 billion from July 2015 to June 2016, according to Credit China FinTech. China-based fintech companies have done well recently, compared with the U.S. and Europe, which experienced weaker activity because of uncertainty created by the U.S. presidential election and the Brexit vote, respectively, according to “The Pulse of Fintech” report for the third quarter of 2016, released by KPMG and CB Insights in November.
Fintech investment in China totaled more than $1 billion in funding for the third quarter of last year, compared with North America investments of approximately $900 million during the same period. “China has embraced a shift toward using mobile to make small transactions, with many retailers not accepting cash at all,” according to the KPMG report. “Given the pace of acceptance for online payment models, it is not surprising to see such a high focus on payments and marketplace lending in the country.”
Regionally, Asia, with its $1.2 billion in funding raised in the third quarter, eclipsed the amount of funding raised by North America ($900 million) and Europe ($200 million) in Q3. The KPMG report also points out that although Asia’s VC fintech funding deals were fewer in number, they were significantly larger in size than fintech investments in the other two regions. There were 96 fintech deals in North America, 38 deals in Europe and 35 in Asia.