The latest “Global Startup Ecosystem Ranking 2024” (GSER) report, released recently, provides a comprehensive analysis of the current status of global startup ecosystems. China’s two major startup ecosystems have seen a decline in their rankings, with Beijing dropping from its previous high of 4th place to 8th place, and Shanghai from 8th to 11th.
On Monday, June 10, the GSER report released by the U.S. research organization Startup Genome is based on extensive research and data analysis of 4.5 million startups in 300 startup ecosystems worldwide. The rankings are determined based on five key factors including funding, performance, market reach, talent and experience, and knowledge. Beijing scored the lowest in the funding category.
China’s weakened economy, increasingly tense diplomatic and geopolitical relations with the United States and its allies, as well as the counterespionage campaigns conducted by the Chinese Communist Party, have eroded investor confidence in the Chinese market.
According to the GSER report, the top three ecosystems have remained unchanged since 2020, with Silicon Valley maintaining its top position, followed by New York and London tied for 2nd place. Tel Aviv has moved up one spot and now shares the 4th position with Los Angeles.
Singapore ranks 7th, the highest in Asia this year; Seoul has risen three places compared to last year, ranking 9th; Tokyo has made the most significant progress, rising five places compared to last year, entering the top 10 ecosystems.
The report attributes Beijing’s decline in ranking mainly to a decrease in the volume of startup transactions and a lower number of successful exits. In the 30 months leading up to the end of 2023, Beijing completed a total of 223 Series A funding rounds, ranking 11th globally, but had only 60 exits, ranking 58th.
Foreign companies remain cautious due to political factors such as the Chinese Communist Party’s emphasis on so-called national security and concerns about the deteriorating relationship between the Party and many Western countries affecting their operations.
The crackdown on U.S. companies by the Chinese Communist Party, including management consulting firms like Bain & Company, investigative firms like Mintz Group, and technology companies like Micron Technology, has led to a loss of trust from foreign investors.
Last month, various state governments in the United States, citing national security risks, have been pressuring public retirement funds to divest from Chinese companies.
Florida Governor Ron DeSantis signed a law requiring the State Investment Commission to stop investing $250 billion in funds in entities with more than 50% ownership by the Chinese government, Communist Party, or military.
China, which has heavily relied on open-source technology from the United States for its development, is now engaged in a technology war with the U.S. In recent years, China has faced increasing restrictions and bans by the U.S. and its allies, with the West no longer willing to share technology with China, contributing to the decline in its startup ecosystem ranking.
Official data released by the Chinese government in February showed that foreign direct investment in China in 2023 reached its lowest level since 1993, plummeting by 82% compared to 2022.
On April 10 this year, international rating agency Fitch Ratings downgraded the credit outlook of the Chinese government to “negative.”