Vertex Ventures, a Singapore-based venture capital firm, is set to raise nearly $500 million for a new China-focused fund.

Around 90% of the fund will be invested in Chinese start-ups, as China is pivoting from relying on imported technologies to its own tech know-how, according to the firm.

Founded in 1988 and acquired by Singapore's sovereign wealth fund Temasek in 2004, Vertex Ventures focuses on venture capital investment opportunities in information technology and healthcare sectors.

"China is shifting from relying on imported technology to its own know-how," said Tay Choon Chong, managing partner at Vertex Ventures China. “It lacks the most underlying technologies, such as those for chips and computing, and it's the right moment for China to play catch-up, which will bring us big opportunities."

In recent years, as the confrontation between China and the US in the tech sector continues to heat up, seeking more tech self-reliance has become a critical agenda for the world's second-largest economy.

At the opening ceremony of the 20th Congress of the Communist Party of China on Sunday, President Xi Jinping emphasized the importance of self-reliance in science and technology and the need to improve the country's capacity for independent innovation.

The bandwagon of seeking technical independence could foster a decent number of outstanding businesses, which presents a great opportunity for venture capitalists. According to the firm, the fundraising scale is up over 50% from the prior time period.

"China's GDP is close to $18 trillion, which is more than half of all of Asia....This is a chance that no other country has, and no one wants to miss out on this market," Xia Zhijin, managing partner of Vertex Ventures, said.

While investing in companies that provide the underlying technology, the VC is also eyeing some industries in which China has built up a certain edge."Chinese innovative companies may have the potential to disrupt some emerging fields, such as new materials, optical communications, optical computing and new energy," Xia explained.

Despite the fact that this decision goes against the grain of what the majority of foreign investors are doing, it reflects the VC's optimism in China's long-term development. 

China is facing increasing capital outflows amid rising US interest rates and waning confidence in the country's outlook. Also, dollar-denominated fundraising by China-focused venture capital and private equity firms has slowed down this year.

"No matter how the international environment changes, as a business-oriented overseas investor, we focus on investing in the markets that can bring the best returns," Tay told the press.

Vertex’s previous investments in China include electric vehicle battery maker SES, Beijing-based chip developer Horizon Robotics, and bike-sharing company Mobike, which was acquired by China’s largest food delivery platform Meituan in 2018.

Cover image by Vishnu Mohanan on Unsplash