How Big is the Tech/Start-Up Ecosystem in China?

There are lots of conversations about the Tech/Start-Up Ecosystem in China. At a high level, everyone knows it’s big. The question is: How big?

Let me break it down into three figures that are critical to the growth of the Tech/Start-Up Ecosystem: Number of Internet Users, Amount of VC Funding, and Number of Engineers.

Internet Users

CountryInternet Users 2020 Q1% of PopulationInternet Growth 2000 – 2020Internet Growth 2015 – 2020

The massive Internet user base is essentially a Tech/Start-Up Ecosystem. China has about three times more Internet users than the US—and even 50% more than India. Assume that the number of Internet users in China will eventually catch up to the US in terms of % of population. The number of Internet users in China would be around 4.5 times larger than that in the US. Based on the current growth rate, most likely this will happen in the next 10 years.

We can argue that ad spending per user in China is still very low. In another blog post, I will focus on the media/advertising industry and consumer behavior in China. However, this massive user base alone is enough to make China one of the biggest tech markets in the world. Another important point is that most of these internet users in China are mobile-first.

VC Funding

VC funding is critical for the Tech/Start-Up Ecosystem, especially for one that may change the world.

In the US, VC deals have been fairly stable over the years ($25-30bn per quarter). Back in 2017/2018, at one point, China’s VC funding was as big as that in the US. However, it started to shrink significantly in the following years. In 2019, VC funding was about $9bn per quarter, which is about one-third the US level.

Of course, in China, lots of capital comes from government grants and contracts. However, most likely, the total funding to the Tech/Start-Up Ecosystem in China is 50% less than that of the US. Given that China had a small bubble in 2017/2018 and that the entire VC industry has only about 20 years of history, it will take a while for China to again reach the level of the US market.

Interestingly, China has almost half of the world’s unicorns—three more unicorns than the US in 2019. Four out of the 10 highest valued start-ups in the world are from China. I believe this is driven mainly by the “winner-takes-it-all” market dynamics in China.

Engineer Talent Pool

The tech industry needs lots of engineers to write code and build hardware. A massive engineer talent pool is the key to success.

China is definitely leading the league in this one. The World Economic Forum reported that China had 4.7 million recent STEM graduates in 2016, and that India had 2.6 million new STEM graduates. The United States had only 568,000.

Among those 568,000 graduates, foreign nationals accounted for 81 percent of the full-time graduate students in electrical engineering, 79 percent in computer science, and 75 percent in industrial engineering. Sixty-nine percent of STEM graduates came from China and India.

To be honest, this gap is much wider than I thought it would be, and is quite alarming for the US.


At this point, the US is leading the total VC funding or total valuation of start-ups. However, if we believe that the engineer talent pool and internet users are leading indicators, the gap between the US and China may close fairly soon. In upcoming blog posts, I will share my perspectives on each element of the Tech/Start-Up Ecosystem in China.

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