China has emerged as one of the most powerful countries in the world. Now, its close ties with Russia, against which the rest of the world has swiftly united since its invasion last week of Ukraine, has put the world’s most populous country in a precarious position.
It’s not so comfortable for foreign proponents of China, either.
While many investors with longstanding relationships in the country, such as the private equity firm Carlyle and the venture firm Sequoia Capital, have demonstrated their ongoing commitment to the region — even in the face of the Chinese government’s year-long private-sector crackdown in pursuit of “common prosperity” — China’s ongoing support of the most reviled leader on the globe could potentially prove a step too far for even the country’s most passionate supporters.
In conversation earlier today with Jim Breyer, the famed billionaire VC who has been happily investing in China for the last 17 years — including through numerous funds he has jointly raised with the Chinese venture firm IDG Capital Partners and across bets that have included Baidu, Tencent, Xiaomi, and, more recently, Binance — he sounded concerned about the changing landscape, even as he spoke in characteristically measured tones about what is unfolding in Europe.
We’ll have more from that wide-ranging conversation soon, but some quick notes from our chat as it pertains to China follow, edited lightly for length.
In 2018, I sat down with Doug Leone of Sequoia Capital, to talk about the firm’s China strategy. Numerous venture firms headed there around 2005, then turned around and left. Sequoia stayed and did well. At the time of our sit-down, the market wasn’t fully opened. American companies were being asked to make a lot of concessions, including censoring the content. But at least you could still make a lot of money on China’s founders and startups. Then came last year’s changes, which made even betting on Chinese startups more challenging. What do you make of the changing landscape?
Doug and I talk about it often. For sure, the last 18 to 24 months in China has been challenging in a number of ways. Cross-border investments and partnerships, about two years ago, completely stopped [whereas for many years] there was strong cross-border investing. My partners and I were the Series A investors in Baidu and Tencent — we were very fortunate — and the Tencent network and the Baidu network in China is extraordinary, with a number of entrepreneurs who have come out of those companies. But now they’re focused on the Chinese domestic market. If you look at what the change has been, it is largely a focus on the Chinese market.
There are certain areas like sustainability and health care and medicine that I am personally passionate about, and I’m hopeful that in the future, we can get back to cooperating — at the United States and China level — in areas like sustainability, and healthcare and medicine. But for sure, it has become a far more complex environment. The investments that the IDG team is making are in areas like sustainability, health care, medicine — and focused on domestic markets. By and large, that’s been a very significant change.
You are still actively involved there.
I’m very happy to have been part of the investment community for the last 16 years, and I fully am passionate about continuing that for many years. I’m involved with the Tsinghua University School of Economics and Management Advisory board, which is really a wonderful who’s-who list of American executives. I was the chair until a year ago, and Tim Cook is now the chair. We did not get together in China over the last year and a half. That’s been via Zoom. But those meetings will start up again later this year.
What did you think when Jack Ma went “missing” in the fall of 2020 after he criticized the Chinese financial system ahead of Ant Group’s expected [and since shelved] IPO?
I was stunned. I’ve known Jack for many years, he’s an extraordinary talent, and I was completely surprised. Simple as that. I think that, if anything, we’re seeing the importance of companies adhering to the ‘middle of the road’ politically. And that’s true in many parts of the world that have prevented mutual cooperation from occurring the way, in some cases, that we were on a path to mutually cooperate.
I can’t predict the future of politics in the U.S., Europe, the Middle East, China, but [politics] for sure has become a more important factor in terms of how one thinks about global investing. My view is there are some areas that are so important for all of us — again sustainability, medicine, health care — and that’s where I see areas of real cooperation and hope. I’m optimistic that we will find more and more ways to cooperate around the world, but for sure, it’s extraordinarily challenging right now.
How does this war in Ukraine change the calculation for you, if at all? China is obviously friendly with Russia, and Russia is very unpopular right now.
Well, of course. I think there are a number of challenges. I’m on the board of Blackstone; I speaking to you from the Blackstone offices here in New York. [There are many] geopolitical challenges and questions.
Within China, the vast majority of investments that we’ve made over the last 18 to 24 months in the areas of health care, medicine and sustainability — themes that are global and fundamentally important and that be the set of themes for the Chinese investments.
In the U.S., [my firm has] for the last six years, gone very deep and very big in artificial intelligence and now in quantum technologies. And my belief is the U.S. is the world leader and will only accelerate its lead in and around areas like artificial intelligence and quantum technologies.
Europe has become a big challenge, of course, with all that’s going on with the huge slowdown in a number of the European economies. There are a number of fintech investments I’ve made in Europe. I see growth there but also a significant slowing of what the revenue growth will be this year and next due to a lot of what we’re currently all experiencing firsthand with the Russian invasion of the Ukraine.
You may remember, but my parents were born and raised in Hungary. In 1956, they were students in Budapest. The Russian tanks entered Budapest, they spent six months in Vienna at the University of Vienna and then my mom and dad came to the United States in 1957. I’m a huge believer in immigrants being phenomenal entrepreneurs and leaders, and a huge believer that [entrepreneurship] is best accomplished in the United States of any area.