Studying headlines about enterprise in China up to now 5 years, international observers is likely to be forgiven for considering the nation of 1.4bn folks is not price contemplating as an funding vacation spot.
From the crushing Covid lockdowns and property sector meltdown to US-led sanctions on Chinese language tech corporations and now President Donald Trump’s commerce warfare, unfavourable sentiment has abounded.
And but, on the bottom on the planet’s second-biggest economic system that can be a high-tech manufacturing powerhouse, some attorneys and different advisers nonetheless contemplate China to be a land of alternative that continues to be misunderstood.
“There are still a lot of opportunities here,” says Joe Chen, a Shanghai-based associate with JunHe, certainly one of China’s high legislation companies, who has been concerned with among the largest personal fairness offers recorded in China.
Among the merger and acquisition exercise is the results of rising geopolitical tensions, as multinational corporations act to shift their enterprise out of China. However transactions have additionally continued for extra sanguine causes, and teams of Chinese language traders — corresponding to insurers, among the most lively — stay hungry for offers.
These offers included different funding supervisor PAG’s sale final 12 months of a majority stake in AirPower’s industrial gasoline unit, Yingde, to a Chinese language consortium. Based on stories, the deal was valued at about $6.8bn, in contrast with PAG’s fairness funding of $1.5bn in 2017, marking a standard exit for the group, which is led by Weijian Shan, a veteran Hong Kong-based personal fairness investor. “For them it was a very normal exit,” says an individual aware of the deal.
Individually, Spain-based healthcare large Grifols bought a 20 per cent stake in blood merchandise producer Shanghai RAAS to Chinese language shopper electronics group Haier for €1.6bn final June. This, JunHe’s Chen says, was a “good asset” that attracted curiosity from a handful of potential patrons earlier than Haier secured the deal.
Statistics on China’s M&A developments, launched this 12 months by PwC’s China group, paint a combined image. On the one hand, the worth of China’s M&A transactions fell 16 per cent to $277bn final 12 months because the variety of so-called megadeals above $1bn fell to the bottom degree in practically 10 years at simply 39.
Nonetheless, PwC additionally noticed a rebound in enterprise capital exercise, with greater than 6,000 offers valued at lower than $10mn, up practically two-thirds in 2024. By way of the outlook, the agency additionally noticed some “positive” indicators, together with: pent-up demand for investments; numerous personal fairness tasks searching for exits; rising demand for abroad investments by Chinese language capital; and a few large transactions stemming from the reform of China’s state-owned enterprises.
From the angle of home traders, some inexperienced shoots may also be detected by way of the rise of a bunch of corporations that embody synthetic intelligence start-up DeepSeek, electric-car maker BYD, battery firm CATL and pioneering robotic maker Unitree. These companies have been held up by traders, and authorities officers, as indeniable examples of the nation’s high-tech prowess. And since September 2024, President Xi Jinping’s administration has additionally touted a collection of measures aimed toward stimulating development, serving to to additional enhance native sentiment after a number of years of malaise.
Shaun Rein, managing director of Shanghai-based China Market Analysis Group, says that regardless of the onset of the US-China commerce warfare, traders from Europe, south-east Asia and the Center East stay extremely enthusiastic about China. However US traders, he notes, are nonetheless firmly on the sidelines.
“There’s so much uncertainty with regulations and the political system in the US that they don’t want to be seen as doing anything in China, lest they get attacked by Trump,” he says.
Sentiment amongst international companies current in China has additionally struggled to recuperate after Beijing’s safety officers cracked down on consultancies working with international multinationals in 2022 and 2023.
Throughout this era, there was a wave of investigations concentrating on the China operations of US consultancies and due diligence companies, together with Mintz Group, Bain & Co and Capvision. It highlighted not solely fears over the private security of China-based employees, but in addition considerations across the threat of falling foul of the numerous security-focused rules referring to know-how, information and privateness.
Alex Roberts, head of Linklaters’ China know-how, media and telecommunications group in Shanghai, argues that the regulatory surroundings is neither as opaque nor as unpredictable as usually portrayed.
“When you dig down and understand the rules . . . with more granularity, there’s more similarities with rules in other markets than people appreciate just from reading headlines,” says Roberts, who has greater than a decade of expertise working in China.
He factors to synthetic intelligence as one instance. The important thing rules in China, he says, kick in when offering generative AI instruments and different rising applied sciences to the general public. However companies have freedom to make use of AI instruments for inside content material manufacturing and operational efficiencies. “People think that you cannot, as a multinational, use AI products that you’ve developed in-house or indeed procured outside China and use those in China at all. Yes, you can,” Roberts says.
He additionally believes Beijing is now “much better” at consulting with business, together with multinationals, through the improvement of recent tech rules. Linklaters has helped purchasers and commerce associations to “plug themselves into that consultation process” and influenced the creation of guidelines that “actually work for a better business environment”, he says.
“There are plenty of multinationals that are very much ‘long on China’ and, indeed, investment firms that I speak to on a day-to-day basis that are long on China and see a lot of opportunities in China,” Roberts says.
