Our recently published 11th annual report shows that the world market for Video Surveillance products is split between China having approximately 45%, and the Rest of the World (RoW) sharing 55%.

As it currently stands, The Chinese Government restricts foreign investment and business in specific key industries and there are certainly regulations on foreign ownership of SaaS companies, which would prohibit many VSaaS and AI Video Analytic companies from operating fully in China. Given also that mass surveillance is a key Government policy, any foreign equipment is basically seen as a risk to national security.

Essentially then, the Chinese market is protected and the vast "Sharp Eyes" & "Safe Cities" public surveillance programs are only open to local manufacturers like Dahua and HIKvision.

These two companies now take over 50% of the total world demand for video cameras and have the scale to, adopt at will, competitive pricing strategies across the globe, taking more market share in western markets.

In December 2019 Cruchbase News reported “There’s something up in China, and it’s not the venture capital market. China-based startups continued a vertiginous downtrend through the end of Q2 2019, breaking step with their US counterparts while ventures in the rest of the world surge ahead in raising nine and ten-figure VC rounds".

Bloomberg reported that the “value of investments in the country tumbled 77% to $9.4 billion” in Q2 2019 versus the same time in the previous year.

It seems "China’s relative position in the global VC ecosystem is shifting. Out of the tens of billions of VC dollars invested worldwide in Q2 2019, Chinese startups accounted for approximately 15 percent of that, down markedly from the past quarter, and is a fraction of what it was in Q2 2018."

This included a number of investments into SenseTime and Megvii, major Chinese AI Software companies. Megvil is one of China’s most ambitious artificial intelligence startups, receiving over $500 million during late 2017 and early 2018.

The reasons for the downturn in Chinese VC Investment aren’t well-documented. However since GDP growth has stagnated since around 2015, together with trade tensions and well documented US bans on Chinese suppliers; could these reasons have caused the drying up of investment?

And what could this mean for video surveillance suppliers in the rest of the world? With more investment can they develop VSaaS and AI Analytics faster than Chinese competitors, to the point where China is forced to use foreign technology and open up their market.

However, as it currently stands trading these products and services in China is not just about technology or performance. It is a political and geopolitical challenge. The Chinese Government sees maintaining it's independence in video surveillance technology as key to national security, and this is unlikely to change in the next few years.