First half beats yearly startup funding in China

Startup funding in Greater China reached its highest level in over six years in the first half of 2026, with $46.8 billion raised—already exceeding the $46.3 billion total for all of 2025. The surge came as the region’s second-quarter fundraising alone hit $26.7 billion, marking the fifth straight quarter of growth and surpassing previous peaks from late 2020-2021, when quarterly totals averaged $22.2 billion. This latest milestone reflects a broader trend of sustained investor confidence, with DealStreetAsia’s report noting that the quarterly total was nearly 2.5 times the level recorded in Q2 2025.

The momentum was driven by a combination of macroeconomic factors, policy support, and a renewed appetite for high-risk, high-reward tech investments. DealStreetAsia’s latest report highlights how Greater China—encompassing mainland China, Hong Kong, Macau, and Taiwan—has become a magnet for capital despite global economic uncertainties. The region’s resilience stands in contrast to broader trends, where funding volatility has been more pronounced in other markets. Investors cite Beijing’s strategic policy backing for deeptech sectors, including AI and advanced manufacturing, as a key differentiator, alongside reforms expanding offshore liquidity and listing options.

Deal volume in the first half of 2026 reached 1,422, up 18.8% from 1,197 deals in the same period last year. While Q2’s 708 deals were slightly below Q1’s pace, the overall trend remains upward, reflecting sustained investor confidence. The real standout, however, was deal value: Q2 saw a 33.4% jump from the prior quarter, and year-over-year comparisons showed an even more dramatic 129.7% increase in H1 2026 compared to H1 2025. Deal volume in Q2 also rose 24.2% year-over-year, showing the broad-based nature of the funding surge beyond just a handful of megadeals.

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Investors bet big on China’s tech rebound

Kent Chen, managing director and head of Asia private equity at Neuberger Berman, framed the current environment as a rare opportunity. “The Chinese economy has gone through basically all sorts of stress tests,” he said. “From a valuation point of view, this is still an attractive moment to look at China.” His assessment aligns with broader observations that the region’s tech sectors, particularly AI, advanced manufacturing, and green tech, are emerging as new growth engines. Chen noted that robotics and embodied intelligence are also gaining traction as investors seek high-margin, capital-intensive opportunities in physical AI systems.

AI and its subsectors dominated the funding environment, with megadeals, defined as investments of $100 million or more, hitting record levels. Q2 saw 64 megadeals totaling nearly $19.3 billion, accounting for 72% of the quarter’s fundraising. AI and embodied intelligence, a niche focused on physical AI systems like humanoid robots, absorbed nearly 60% of that total. The two sectors combined secured $14.2 billion across 286 deals, showing their outsized role in the current funding cycle. Megadeals accounted for 72% of Q2’s fundraising total.

Beyond AI, deeptech industries like electric vehicles, healthtech, and space tech also attracted significant capital. The broader AI sector alone saw $8.6 billion raised across 162 deals in Q2, while embodied intelligence deals totaled $5.6 billion in 124 transactions. The exponential growth in AI funding is particularly striking: H1 2026’s $12.7 billion in AI investments represents a 11.3x increase over the same period in 2025 and a 3.6x jump from last year’s full-year total. Investor focus on large language models (LLMs) and embodied robotics has further intensified, with these subsectors driving much of the megadeal activity.

AI valuations soar but public markets lag

The surge in AI funding has pushed private-market valuations higher, though some investors caution against overheated expectations. Richard Yang, managing partner at Sinovation Ventures, noted that public markets “will correct for sure” as sentiment shifts from scarcity-driven trading hype to fundamental business validation. His warning reflects a growing divide between private and public valuations, where private-market enthusiasm has outpaced market realities. The disconnect suggests that while private investors remain bullish, public market corrections could test the sustainability of current valuations.

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While funding activity remains strong, the path to exit remains uneven. IPO activity in Greater China showed signs of recovery in Q2, with 74 listings raising nearly $11.4 billion, up 29.8% in volume and 28.5% in proceeds from Q1. The Hong Kong Exchange’s Main Board remained the primary listing venue for Greater China companies, while mainland China’s A-share markets also saw acceleration. In contrast, IPO activity for Greater China-based companies in the US remained severely constrained. Only one listing, DSC Holdings Ltd, a provider of AI application infrastructure for China’s used-car industry, completed a Nasdaq listing this year on June 26, raising about $51 million. This followed a free fall in such listing activity per quarter throughout 2025.

IPO reforms revive Greater China listings

Reforms across mainland China and Hong Kong exchanges have played a key role in sustaining IPO momentum, particularly for innovative companies in AI and semiconductors. The report notes that massive investor demand for deeptech assets like AI and semiconductors, strategic policy backing from Beijing, expanding offshore liquidity, and continued listing reforms have contributed to the recovery in IPO activity.

Looking ahead, the region’s ability to sustain funding growth will depend on execution in high-value sectors like AI and embodied intelligence. While current valuations appear attractive, the correction in public markets could test private investors’ confidence. For now, however, the data suggests that Greater China’s startup ecosystem remains one of the world’s most dynamic, even as it handles external pressures. The report’s insights emphasize the importance of policy continuity, investor discipline, and sector-specific execution in maintaining the current trajectory.