China is still well behind Silicon Valley in venture investing overall as the U.S. reached its own new record of $296.6 billion last year, more than twice the total for the Asian country

When China’s government launched a crackdown on the technology industry over the summer, panicky venture capital (VC) investors stopped investing and startup valuations began to plummet. It looked like the country’s historic innovation boom was over.

Then, in just a matter of weeks, the startup machine kicked back into gear. In fact, VC investments in China reached $130.6 billion for 2021, according to the research firm Preqin. That set a new record for the country – nearly 50% higher than the $86.7 billion total the year before.

The performance is stunning given the devastation wrought on the industry’s marquee players. Alibaba Group Holding Ltd., Tencent Holdings Ltd., ByteDance Ltd. and ride-hailing provider Didi Global Inc. were all battered in turn over the past few months. The entire online tutoring sector, once a hot spot for venture dollars, was forced to turn non-profit.

Yet entrepreneurs and venture firms pivoted to new opportunities with startling speed. They’ve turned away from softer internet businesses and toward hard-core technologies like semiconductors, robotics and enterprise software. The amount of money going into biotechnology hit $14.1 billion last year, up ten-fold from 2016.

Investors’ appetite for China tech remains intact. What has changed, however, is where they park their money, says Jiang Jingjing, a lawyer who specializes in fundraisings at King & Wood Mallesons in Hong Kong. It has become quite clear that more and more funding has flowed to startups with cutting-edge technology.

China is still well behind Silicon Valley in venture investing overall. The U.S. reached its own new record of $296.6 billion last year, more than twice the total for the Asian country.

But in certain fundamental technologies, China has already surpassed the U.S. For example, Chinese chipmakers, integrated circuit designers and other semiconductor startups received $8.8 billion in funding last year, more than six times the $1.3 billion invested in comparable companies in the U.S., according to Preqin data.

While President Joe Biden has been desperate to lift U.S. semiconductor manufacturing capabilities, Chinese chip startups have been overwhelmed by funding offers.

In China right now, it’s getting crazy, says Yong Luo, a former Intel Corp. engineer who raised money for a new semiconductor startup though he’s probably two years from generating revenue. The chip sector is really hot.