China tech bubble is dead, long live China tech bubble

Last year, the wave of mainland money piling into Chinese technology companies pushed valuations into a bubble territory. That made life difficult for foreign private equity firms that have to make new investments to survive — but there’s a glimmer of light at the end of this investing tunnel. Fundraising from rich Chinese entrepreneurs and shadow banks is drying up, so there could be less cash competing for returns in future.

More than a third of private equity money newly invested in the Asia-Pacific region last year was in China tech and internet plays, according to Bain & Co. With so much money chasing a limited number of targets, valuations inevitably climbed: The median enterprise value for Chinese internet and tech takeovers was 31 times Ebitda, twice as high as for other industries in greater China and 2.4 times greater than the median multiple for Asia-Pacific deals in 2016-2018, said Bain.