SoftBank Reduces Investments in China Due To Regulatory Uncertainties

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SoftBank will suspend its investments in Chinese startups until the extent of pressure from the Beijing government to the technology sector becomes clearer, said on Tuesday (10), Masayoshi Son, the bank’s chief executive.

SoftBank’s pullout marks the loss of one of China’s most aggressive tech investors and signals a correction in startup valuations there. The Japanese group has invested billions of dollars in some of the country’s biggest technology companies, including Didi Global, ByteDance and Alibaba Group Holding.

At a news conference, Son stressed that “it is not against the Chinese government” and that “a new order” will be built under the new rules in a year or two. “If the situation becomes clear, there is a possibility that we can actively engage in investment activities,” he said.

SoftBank Investment in China

SoftBank is heavily exposed to the Chinese market, with its stake in online shopping company Alibaba still representing 39% of its asset value. But since April, Son said that only 11% of his new investments were directed to companies in the country. Only in the IPO of Chinese company Didi Global, in June, the Japanese bank invested almost US$ 11 billion. However, Didi’s shares have fallen 33 percent since then after a crackdown by Chinese regulators on data security scared investors.

The additional regulatory measures have cast considerable uncertainty on listed Chinese companies and increased pressure on SoftBank’s portfolio in China. Shares in Full Truck Alliance, real estate company Ke Holdings and fintech firm OneConnect Financial Technology have fallen more than 30% since July.

Bet on artificial intelligence

Despite China’s imminent risks, Son unveiled a series of steps to double the group’s bets on artificial intelligence (AI) through its investment vehicle Vision Fund. By his executive’s calculations, SoftBank’s investment in unlisted AI companies has represented about 10% of the total capital raised by these companies worldwide since 2017.

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