The financial landscape for 2024 is poised to experience a dichotomy that many are dubbing "ice and fire," according to Ying Wenlu, chairman of Yida CapitalThis forecast reflects an unprecedented level of pressure facing all sectors of the capital market, particularly in fundraising, investment, and exit strategiesNotably, these three components have shown a decline for three consecutive years, indicating a pertinent shift in market dynamics.

Ying shared insights with reporters about the intricacies of the first-level market, highlighting the considerable challenges it is encounteringOn the fundraising front, although there is a growing call for "patient capital," the receptivity of private investors remains lacklusterThe gap between intention and execution can be attributed to a dearth of enthusiasm and vitality among private capital sourcesWhen it comes to investments, a concerning phenomenon has emerged where the secondary market is experiencing a valuation mismatch compared to the primary market

This has resulted in a narrow landscape for investment opportunities, further complicated by increasing competition within various market sectors.

The exit strategy segment has become exceptionally narrow, leading to a pronounced issue of “exit bottlenecks” as the pace of IPOs has deceleratedWith the end of the year approaching and a new one on the horizon, Ying’s observations on the anticipated trends for 2025 offer a glimmer of hope amidst these challenges.

He posits that the fundamental motivation for capital markets to support technological innovation will remain steadfastThere will be no systemic barriers to listing high-quality, loss-making tech companiesFor those core technology entities characterized by significant research and development investments and possessing technological barriers, Ying affirms that the capital market will deliver fair evaluations

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The emphasis will be on understanding the core competencies of these enterprises while navigating the evolving economic landscape.

Moreover, Ying advocates for a strategic focus on high-level self-reliance in technology and enhancing supply chains, which should direct investment patterns align with national prioritiesSpecial attention should be placed on companies that face pivotal challenges, often dubbed “choke points” in supply chains, as well as firms that are positioned to resolve deeper issues related to imported alternativesHowever, this investment strategy must be approached with a balance of bold assumptions and careful validation to mitigate risks associated with so-called “pseudo-technology” investments.

Transitioning from a landscape focused on “survival of the fittest” to one where the “survivors thrive” will be another hallmark of the industry in 2025. The roles of leading investment institutions are expected to be amplified during this market cleansing process

In recent years, several investment firms have fallen behind or even become "lost," exacerbating the impact of headwind effects on leading firms in the first-level market.

Furthermore, Ying notes, local governments are likely to ramp up competition for top-tier investment institutionsFollowing the implementation of the Fair Competition Review Regulations, the allure of government-led investment using land, taxes, or financial incentives has diminishedThis shift is expected to drive governmental efforts from policy-based investments towards a more fund-centric approach, particularly for attracting significant capital players.

As the investment landscape transitions from an "incremental age" to a "stock age," the channels for exits—IPOs and mergers and acquisitions—are poised to become dual mainstaysYing indicates that the Chinese economy is gradually embarking on an era dominated by “stock economics,” wherein robust enterprises, including leading private and state-owned firms, increasingly seek to consolidate their positions along industry and supply chains through M&A activities

With the potential of IPOs becoming a scarce commodity in the near term, he anticipates mergers and acquisitions will reshape the dynamics of capital markets, propelling new trends and energy.

Looking ahead, the investment sector is expected to pivot from a “flashy debut” model to a renaissance of diversity and proliferationHistorically, a select few investment firms capitalized on one or two "star companies" during the internet boom to reap exceptional profitsHowever, as the broader narrative transitions to an age ruled by technological advances, many sectors will exhibit high ceilings capable of accommodating numerous successful firmsThis "blooming of a hundred flowers" paradigm will see the emergence of a plethora of brilliant tech enterprises as cornerstones of the modern industrial ecosystem.

Ying emphasizes that investment firms must recalibrate their mindsets

It will no longer suffice to rely solely on the success of isolated projects to blanket the overall fund returnsInstead, they should actively pursue leading enterprises while also being open to early, small-scale, innovative, and hard-tech investmentsThe proliferation of mid-sized and smaller tech firms will serve as the fundamental building blocks for the larger “innovation forest,” which is essential for developing a sophisticated modern industrial framework.

Finally, when considering economic cycles, Ying predicts a transition from the “market trough” to a phase of restored confidence by 2025, suggesting that the most arduous challenges may soon dissipateHe points out that some industries are currently in an "adjustment and recovery" phase, particularly in sectors like consumer electronics, batteries, and semiconductors, which have begun to show signs of rebounding