Life is getting harder for foreign VCs in China

THE FIRST “demo day” in Beijing last November of Y Combinator (YC) hosted two dozen local startups vying for the attention of high-profile investors. It marked the entrance into China of Silicon Valley’s most famous accelerator, which has helped launch the likes of Airbnb and Dropbox. Then, days later,YC abruptly announced it was pulling out of the country.

In a statement YC said that it was returning, under a new boss, to investing in startups from its Californian base. Its Chinese startups will be nurtured by MiraclePlus,YC China’s new, fully localised incarnation. Yet in the context of a deepening Sino-American rift, the retreat looks ominous. “Under the current global environment, to realise our mission—By China, For China, Of China—we must have the ability to master our own destiny,” wrote MiraclePlus in a social-media post, citing Lu Qi, its boss, whom YC had hired to set up its Chinese arm in 2018. (Mr Lu declined to be interviewed for this article.)