![Watch What Beijing Says - and Does](https://cdn.prod.website-files.com/5a3e922cf6b9a40001bc2d70/61afea0d1150040b5bcd8c56_4RiFqORXafcMpKX-Cdy-Uzl72eJkfbmt4t8yenImKBUrkZYC-qKAy-rC6LxShaqt.jpg)
Besides listening to Xi Jinping, you can discern Beijing’s priorities and its likely actions through its big policies - and this is my point here.
- One of my favorite case studies comes data included in Pitchbook's H1 2021 ‘Greater China Venture Report,’ about venture capital investment in China
As the chart below shows, VC firms' total investment in software or 'soft' tech each year has moved up and down in a fairly narrow range (with the exception of 2018's $14 billion into Ant Group and $4.6 billion into Didi).
![](https://cdn.prod.website-files.com/5a3e922cf6b9a40001bc2d70/61afe9bbae046cef6d09d05e_1wIcp-MIg_jpdjVCFvL2yjl72eJkfbmt4t8yenImKBUrkZYC-qKAy-rC6LxShaqt.jpeg)
Then this next chart caught my attention.
- Investment in hardware or 'hard' tech increased almost tenfold over the same period (although even at its 2021 peak it was substantially less than investment in 'soft' tech).
![](https://cdn.prod.website-files.com/5a3e922cf6b9a40001bc2d70/61afe9bbc7555d5a60f590b7_oYQdD4_g_O5-ItkPdjn0Nzl72eJkfbmt4t8yenImKBUrkZYC-qKAy-rC6LxShaqt.jpeg)
So what happened?
- The report doesn’t make this connection, but we do know in that same year, 2015, Beijing announced ‘Made in China 2025’ and other such initiatives.
And what are the industries targeted for growth by these initiatives?
- Semi-conductors, electric vehicles, and all sorts of high-tech equipment – in other words, ‘hardware’, as the chart below from MERICS shows.
![](https://cdn.prod.website-files.com/5a3e922cf6b9a40001bc2d70/61afe9bb62ac0674d40f39d0_4RiFqORXafcMpKX-Cdy-Uzl72eJkfbmt4t8yenImKBUrkZYC-qKAy-rC6LxShaqt.jpeg)
Apparently venture capital funds paid attention to and heeded the change in Beijing’s priorities and ramped up their 'hard' tech investments accordingly.
But most of those funds had an advantage.
- The overwhelming share of VC investment overall came from companies in Greater China, as this chart shows:
![](https://cdn.prod.website-files.com/5a3e922cf6b9a40001bc2d70/61afe9bbf66d3d33eecd5587_SThDIy5jkdEmxAt8E6JocTl72eJkfbmt4t8yenImKBUrkZYC-qKAy-rC6LxShaqt.jpeg)
I would posit that being based in Greater China the managers of these funds, whether or not owned locally or by foreigners, have more experience with and more understanding of how China works than their western counterparts.
- The upshot of this is that western investors and CEOs have to do the same.
You can't align yourself with Beijing's priorities if you don't see when they're right in front of you.