US VC Firm Eight Roads to Sell Stakes in 40 Chinese Tech Firms

Eight Roads, a US venture capital firm backed by Fidelity Investments, is preparing to sell its stakes in around 40 Chinese tech startups, according to a Bloomberg report.

The planned divestment, which may involve discounts of up to 80%, has been influenced by growing geopolitical tensions and weakening investor confidence in China’s tech sector. Eight Roads will reportedly shift its focus to managing existing holdings and investing in healthcare, marking the end of its involvement in China’s internet startup scene.

Eight Roads reportedly began evaluating the sale of its China tech portfolio earlier this year, with the assets now valued at around US$1 billion. The holdings, which include a stake in autonomous driving firm Pony.ai, are expected to be sold at steep discounts of 60% to 80% from their peak value. The firm has not publicly commented on the matter.

The exit signals a deeper shift in global venture capital as geopolitical tensions rise and investor confidence in China weakens. In January 2025, the US imposed new restrictions on investments in Chinese sectors, including AI and semiconductors, adding to existing trade tensions and tariff hikes. For long-term investors like Eight Roads, the growing regulatory uncertainty has increased the risk of holding assets in China.

This trend is not limited to Eight Roads. In 2023, Sequoia Capital split its global operations, with its China arm becoming independent under the name HongShan. GGV Capital followed with a similar move, separating its US and Asia operations. 

Limited partners, including US pension funds and endowments, are also under pressure to reduce exposure to Chinese tech. As international capital retreats, Chinese startups are increasingly relying on local, yuan-based funding. Domestic funds and government-backed investors are now stepping in to fill the gap left by global VCs.

Official support is also growing. China has launched a 1 trillion yuan venture capital fund and introduced innovation bonds to support sectors such as AI and quantum technology. According to data from Zero2IPO Group, yuan-denominated funds have now surpassed US dollar funds in deployment, showing a major shift in who is funding the country’s next wave of tech companies.

Despite breakthroughs by Chinese AI startups like DeepSeek, which impressed investors with advanced language models earlier this year, global capital remains cautious. 

A recent Morgan Stanley report noted that while Chinese stocks make up 29% of MSCI’s emerging markets index, global investors have allocated just 26.6% of their funds to them—a record gap. Analysts say the interest in China’s innovation potential has not yet translated into significant foreign investment.

The pullback from US venture capital is a turning point for global tech investing. Geopolitical pressures are now reshaping capital flows that once moved freely across borders. For US investors, this shift may mean losing access to promising Chinese startups. For Chinese firms, it brings greater reliance on local and state-backed funding. This financial separation mirrors broader decoupling trends in global tech, particularly in areas like semiconductors and AI.