China’s intensifying crackdown on technology companies is proving to be a cautionary tale for investors in the nation’s startups, with one notable exception: consumer brands.
From cosmetics to bubble tea, Chinese ventures making waves among a new generation of shoppers are becoming a magnet for funds hunting for their next big hit. Investors may see such companies as a viable alternative to tech startups because the government, rather than clamping down, is pushing to foster domestic champions that can fuel spending and compete with the likes of Coca-Cola Co. and Nike Inc.
Beijing’s tightening regulation is increasing barriers to invest in traditionally popular areas such as tech, said Mark Tanner, managing director of Shanghai-based marketing and branding firm China Skinny. "In contrast, consumer sectors from food, fashion to fitness and leisure are seeing increased interest from investors with more policy support,” he said.