(Yicai) Jan. 2 -- Mergers and acquisitions have become the main channel for Chinese institutional investors to get their money back as the country’s regulators make it harder for startups to go public.

Last year, more private equity fund managers and venture capital companies exited through M&As than through initial public offerings, according to data from brokerages, which analyzed about 900 withdrawals of early-stage investment. 

China’s securities watchdog said in August last year that it will slow the pace of IPOs to promote a dynamic balance between investing and fundraising. It also said it will tighten curbs on refinancing by loss-making and poorly performing listed firms.

With the tougher IPO climate, more companies are carefully considering M&As as investors seek to recoup their investment, said Chen Jie, the executive in charge of global M&As at the investment banking division of China International Capital Corporation.

This is boosting the number of M&As, particularly in the science and technology sector, Chen said.

The establishment of the Nasdaq-like Star Market on the Shanghai Stock Exchange in July 2019 and the rolling out of the quicker registration-based IPO system has helped many science and technology companies to go public. To maintain their competitiveness, tech firms will focus on M&As, especially those in the segment of hardcore technologies, he added.

Companies with large market capitalizations or industry leaders have a large network, strong fundraising ability, and strengths in technology, human resources and other areas, which makes them attractive as buyers.

Last year, 313 companies went public, down from 421 in 2022. And 271 firms pulled their IPOs.

Editor: Kim Taylor