Startups in China got tons of investment funds last year with the health care and semiconductor sectors both smiling to the bank amid the COVID-19 restriction across the globe.

On the other hand, internet companies and video gaming sectors fell out of favor in the country as the Chinese government continued with its harsh regulatory crackdown on these sectors.

According to reports, total funding for private sector firms in the so-called “new economy” totaled about US$296 billion or CNY 1.89 trillion in 2021 alone. This was a 6.6% increase compared to the previous year according to ITjuzi, a Beijing-based market researcher.

The global shortage of semiconductors which is a key component in nearly all electronics led to startups raising about CNY 143.2 billion just last year across 501 deals in China, compared with 181 billion yuan for 339 deals in 2020. Although the total amount was down, the money was spread across a much larger number of companies.

There are other contributory factors such as the political tensions between China and US which have lasted more than 2 years now with numerous Chinese companies blacklisted in the US.

All these have prompted the urgency in China to cultivate self-made chip makers in order to quickly cover the lost grounds as the global chip shortage is expected to last until the year 2023.

Funding for semiconductor start-ups was relatively modest before 2020, with total investments of CNY 42.1 billion and CNY 45.7 billion in 2019 and 2018, respectively, ITjuzi data showed.

There was also a big growth in the funding of the health care industry as it sees a 27% YoY to CNY 330.9 billion in the year 2021.

“Most of the capital went to hard tech such as health care and semiconductors”, said Liu Xiaoqing, an analyst at ITjuzi.

“Funding for the internet sector is winding down,” she said. “The trend is highly related to how [government] policy encourages new infrastructure while regulating the internet platform companies.”

Internet companies on the other hand have faced the wraths of the government as they were accused of abusing their power and creating unbearable environments for others to thrive. This has led to restrictions on offshore IPOs over data security concerns, suspension of licence approvals for new video game titles, fines, and so much more.

There are also e-commerce companies that saw about CNY 103.8 Billion, a second consecutive year of negative growth while not meeting the peak of CNY 170 billion that it did back in 2014.

Gaming companies raised only 13.6 billion yuan in 2021, up 28 per cent from the year before, but a steep drop from the 33.5 billion yuan in 2019, according to ITjuzi.

The education technology sector, which enjoyed a boom when Covid-19 lockdowns popularised remote schooling in 2020, raised only 21.2 billion yuan in 2021, a significant drop from 72.8 billion yuan the year before.

In fact, off-campus tutor firms got hit hard by central government’s ban which prohibits them from doing business for profit.

However, according to ITjuzi, the overall investment in the country in the new economy is expected to be very much active this year – especially in sectors that are “are strategically new industries that innovate on business models, operation concepts or drive technology development”, such as information technology, health care, new energy and new materials.

Also, it’s worth mentioning the fact that the State Council published a major plan to boost its global competitiveness in the digital economy before the year 2025 – a time China is expected to improve on its digital transformation while also closing the gaps between different industries and social groups as well as the better usage of data resources, and improvement in governance of the digital economy.