The collapse of tech-focused Silicon Valley Bank has no doubt dealt a huge blow to several tech startups across the globe, as the ripple effects of the collapse have been reportedly felt by Chinese startups, particularly those backed by U.S. dollar-denominated funds.

A Chinese tech founder who pleaded anonymity disclosed that the online system for opening an account at Silicon Valley Bank had allowed the use of a Chinese mobile number for verification. A startup could open an account at SVB in a space of one week, which was what spurred most Chinese tech start-ups to bank with SVB.

The founder disclosed that his startup once had tens of millions of U.S. dollars at SVB and has since moved funds out, but still has more than $250,000 stuck in the bank. He however disclosed that if there will be no SVB, it will negatively impact the tech industry, because there is no other bank that provides the features of speedy account opening for startups and visibility for venture capitalists.

Also, a Shanghai-based biotech company Zai Lab disclosed that as of the end of December 2022, about 2.3% of its roughly $1.01 billion in cash and cash equivalents were held at SVB. Chinese startups, entrepreneurs, and Venture funds are reportedly looking to move their funds out of SVB, with some turning to Chinese lenders such as Merchant’s bank and the Industrial & Commercial bank of China.

Having a bank account with a Silicon Valley bank allowed most Chinese Startups to tap funding from U.S based investors, with an eye to a public offering in the U.S. These startups had long relied on the tech-focused bank, which has forged ties with local government officials in Shanghai, for venture capital funds.

Reports disclose that the Chinese government exerts strict controls over its currency and imposes restrictions on foreign investments, making SVB one of the few lenders willing to work with China-based startups seeking capital from offshore investors.

In 2012, SVB partnered with Shanghai Pudong Development Bank to form SPD Silicon Valley Bank Co., which provides VC funds to tech startups. The SPD Silicon Valley Bank has however issued a statement that it has sound operations in accordance with Chinese laws and regulations, and perhaps more importantly, it has an independent balance sheet.

The collapse of SVB happened so swiftly, with $42bn leaving the bank’s coffers, that by the time decision-makers in China were waking up to the unfortunate news, attempts to recover their money were already in shambles. Several Chinese-based venture capital firms disclosed that some start-ups in their portfolios faced similar issues of not being able to access funds stuck in SVB.

It is however not clear how many China-based startups had accounts with SVB. Few Chinese tech founders have disclosed that the collapse of SVB could make it hard for Chinese startups to raise money from U.S investors

The Collapse of the Silicon Valley bank comes at a particularly tough time for Chinese groups raising foreign capital, with the ecosystem negatively impacted by Beijing’s tech crackdown, Covid-19 pandemic controls, and rising geopolitical tensions with Washington. Experts disclose Silicon Valley Bank collapse would lower the trust of Chinese companies in foreign banks, which will make them more cautious when considering U.S. dollar funds.

Meanwhile, reports disclosed that even before the SVB financial implosion, the Chinese tech sector has had trouble raising capital in the U.S., courtesy of the heightened geopolitical tensions as well as China’s economic problems.