Private equity investments in China might experience a more robust rebound, thanks to greater funding from the Middle East and flexible approaches adopted by American firms, as stated by Bain & Company.

“Positive momentum for China might result in an improved outlook as early as 2025 and 2026,” noted Sebastien Lamy, who co-leads the Asia-Pacific private equity division at the global consulting firm, during his comments on Friday. He further mentioned that various elements are contributing to this possible upturn.

The latest upturn in the stock market, spurred by an artificial intelligence start-up, has been noteworthy.
DeepSeek
Lamy mentioned that ‘s technological advancement coincided with certain medium-term trends concerning the Chinese market, thereby improving the prospects.

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“Increasingly, we have seen private capital, especially from the Middle East, coming in and starting to fill the private-capital funding gap,” he said.

Geopolitical strains have caused certain Western private equity investors to become more cautious regarding the globe’s second-biggest economy. However, sentiments were distinct amongst Middle Eastern sovereign investors, who comprised
62 percent of the investments made by sovereign wealth funds in China
as per the information provided by Global SWF last year.

“We began investing in China back in 2015 and continued our involvement even as many Western companies were exiting. During this period, we’ve also ramped up investments across Asia,” stated Marc Antaki, Deputy Chief Strategy and Risk Officer at Mubadala Investment—the sovereign wealth fund from Abu Dhabi—at the Milken Global Investor Symposium held in Hong Kong on Monday.

Moreover, according to Lamy, certain U.S.-based investment funds were adjusting their approaches to investing in China toward “lower-risk and less-exposed” opportunities, citing instances like cross-border transactions as examples.

He mentioned that companies with operations in both China and the broader Asian market, where they can genuinely create value through their global presence while still having significant exposure to China without being entirely focused on it, represent an interesting opportunity.

In August 2023, the American investment firm Bain Capital acquired China-based data center provider Chindata Group Holdings through a privatization deal valued at approximately $3.2 billion. Chindata offers data center services across emerging Asian-Pacific markets and had previously been listed on Nasdaq.

Lamy mentioned that technology investments in the area have been increasing as positive feelings in the public markets gain strength.

The recent advancements with increased innovation from Asia, spearheaded by China, should lead to greater investment in technology,” he stated. There has been an uptick in funding directed towards “supportive industries” like data centers, which serve as crucial infrastructures for these technologies.

Lamy stated that significant progress in private equity investments within China would require considerable time to materialize. He also mentioned that stakeholders must observe successful exits from these investment opportunities by private equity firms and ensure that returns reach the investors accordingly.

In 2024, the total value of deals in the Asia-Pacific region increased by 11 percent to reach US$176 billion, as stated in Bain & Company’s yearly private equity report published on Tuesday.

“We’re emerging from several years of rather stagnant private equity markets throughout the Asia-Pacific region, particularly seeing a notable decline in China during this period,” stated Lamy, one of the authors of the report.

In 2020, China accounted for over half of the total deal value in the Asia-Pacific region; however, this proportion decreased to just 27% last year. The overall deal value for the area also saw a decline.
lowest in a decade
In 2023, owing to sluggish economic expansion, elevated interest rates, and fluctuating stock markets.

According to Bain & Company’s analysis, India and Japan have emerged as the favored nations in the area recently. Despite facing significant economic hurdles, India continues to be an attractive destination for investors due to its rapid growth. Meanwhile, Japan is seeing more interest from private-equity firms because of its robust past performance and growing privatization prospects, the report noted.

“I anticipate that 2025 will mark further economic improvement in the Asia-Pacific region, building upon what we expect for 2024. Given that businesses have been adjusting to recent shifts in broader economic conditions and are increasingly focused on forming teams designed to use capital more effectively, this trend seems likely,” stated Lamy.

More from The South ChinaMorning Post:

• China’s stock rerating spurs widening premiums in ADRs for Alibaba, Li Auto
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