New tech infrastructure will boost investment, analysis says

The country's call for accelerating the construction of new infrastructure projects, including 5G networks, internet of things, artificial intelligence and industrial internet, will become investment hot spots over a period of time, according to a new report from global accounting firm PwC.

The report said private equity and venture capital investments in the telecommunications, media and technology industry recovered in the second quarter of 2020, after a fall in the first quarter.

However, investment volume and value hit a three-year record low in the first half of 2020. A total of 1,187 PE/VC deals in the TMT industry were recorded in the January-June period, down 28 percent on a yearly basis. Deals with disclosed investment value amounted to $14 billion in total, a decline of 6 percent year-on-year.

"Despite signs of recovery in the second quarter of 2020, the market took a wait-and-see approach in pursuing PE/VC deals," said Wilson Chow, PwC global TMT industry leader.

Chow noted whether the recovery trend will continue depends on the effects of various national policies that are favorable to the TMT industry, such as the capital market reform and the long-term economic impact imposed by the pandemic.

Among the four sub-sectors of the TMT industry, the technology industry recorded the highest investment volume, with its investment value outpacing the internet and mobile sub-sectors.

There were 760 deals in the technology sub-sector in the first six months, with total investment value reaching $7.92 billion. The period saw 14 deals each sized at over $100 million, accounting for 50 percent of the total investment value in the TMT industry.

However, the entertainment and media sub-sector saw the most devastating impact from the pandemic. The films and entertainment industries were suspended and saw a decline in the demand of advertising business.

Janson Yang, PwC Chinese mainland assurance partner, said: "As the pandemic eases, the government has proposed a goal of building data centers in the first half of 2020. Coupled with the accelerated new infrastructure policies, a large amount of capital has flowed into the areas of 5G, internet of things, artificial intelligence and industrial internet. These areas will continue to be investment hot spots for some time."

In addition, along with the implementation of favorable policies on new infrastructure construction and data centers, the booming STAR market and registration-based IPO system successfully adopted by ChiNext board, Yang predicted the TMT's sub-sector in technology, internet, mobile internet and telecommunications have strong prospects in the future.

Emily Liu, PwC Chinese mainland assurance partner, said as various favorable policies are put into practice and the pandemic eases in China, the firm expects PE/VC activity to pick up this year.