Chinese start-ups have attracted more venture capital funding than their US counterparts for the first time, according to a report from information and data provider Preqin and graduate business school INSEAD.

The report said that in the first half of 2018, $56 billion was invested in China-based early-stage companies, compared to $42 billion in the US during the same period.

“China’s emergence as a hub of innovation and entrepreneurship has been the major venture capital narrative of the past five years,” Christopher Elvin, Preqin’s head of private equity, said in a release.

Elvin said conditions in China are suited to promote large technology firms because the country has more mobile phone users than any other, and ecommerce and mobile payment technology is already deeply embedded in their lives.

“With several unprecedentedly large funds in market to raise capital for investment in the sector,” Elvin added, “the prospects are bright for further developments in the China-based startup market.”

The report described the recent growth in China’s venture capital market as “meteoric,” as it has grown more than 12-fold in just the first half of the year from $4.6 billion for all of 2010. It also said that although the US is still the biggest venture capital market in the world, five of the 10 largest “unicorns” are based in China, which the report calls “red unicorns.”

This includes Ant Financial Services Group, which is currently valued at $150 billion. The report defines venture capital unicorns as privately held, venture capital-backed companies with valuations of $1 billion or more. It also noted that China-based companies account for three of the five largest IPOs of venture capital unicorns, including the largest – Alibaba Group, which had a value of $231 billion when it held its IPO in 2014.

“Looking at the growth of the Chinese VC market over the past several years, it looks promising that China could become the market-leader of VC in the world,” said the report. “Data suggests that both the money flowing into early-stage companies as well as the money flowing back to investors is currently on the rise, indicating the development of a full investment cycle empirically.”

However, the report said that because VC market in China is still very young it is too early to conclude whether its current growth is sustainable or not. “China is also well known to forge its own path,” the report said, “making it difficult to compare to the historical development of Western markets.”

Tags: China, Preqin, venture capital