Studying headlines about enterprise in China prior to now 5 years, overseas observers is perhaps forgiven for pondering the nation of 1.4bn individuals is not value 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 conflict, adverse sentiment has abounded.
And but, on the bottom on the earth’s second-biggest economic system that can also be a high-tech manufacturing powerhouse, some legal professionals and different advisers nonetheless think about China to be a land of alternative that continues to be misunderstood.
“There are nonetheless a variety of alternatives right here,” says Joe Chen, a Shanghai-based associate with JunHe, one in every of China’s high regulation companies, who has been concerned with a number of 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 buyers — akin to insurers, a number of the most lively — stay hungry for offers.
These offers included various funding supervisor PAG’s sale final yr of a majority stake in AirPower’s industrial fuel unit, Yingde, to a Chinese language consortium. In response to experiences, 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 really regular exit,” says an individual conversant in the deal.
Individually, Spain-based healthcare big Grifols offered 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 consumers earlier than Haier secured the deal.
Statistics on China’s M&A traits, launched this yr by PwC’s China staff, paint a combined image. On the one hand, the worth of China’s M&A transactions fell 16 per cent to $277bn final yr because the variety of so-called megadeals above $1bn fell to the bottom stage in almost 10 years at simply 39.
Nevertheless, PwC additionally noticed a rebound in enterprise capital exercise, with greater than 6,000 offers valued at lower than $10mn, up almost two-thirds in 2024. By way of the outlook, the agency additionally noticed some “constructive” indicators, together with: pent-up demand for investments; numerous personal fairness initiatives looking 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 buyers, some inexperienced shoots will also be detected by way of the rise of a bunch of corporations that embrace synthetic intelligence start-up DeepSeek, electric-car maker BYD, battery firm CATL and pioneering robotic maker Unitree. These companies have been held up by buyers, 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 geared toward stimulating progress, 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 conflict, buyers from Europe, south-east Asia and the Center East stay extremely focused on China. However US buyers, he notes, are nonetheless firmly on the sidelines.
“There’s a lot uncertainty with laws and the political system within the US that they don’t wish to be seen as doing something in China, lest they get attacked by Trump,” he says.
Sentiment amongst overseas companies current in China has additionally struggled to recuperate after Beijing’s safety officers cracked down on consultancies working with overseas multinationals in 2022 and 2023.
Throughout this era, there was a wave of investigations focusing 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 non-public security of China-based workers, but in addition considerations across the danger of falling foul of the various security-focused laws referring to know-how, information and privateness.
Alex Roberts, head of Linklaters’ China know-how, media and telecommunications staff in Shanghai, argues that the regulatory surroundings is neither as opaque nor as unpredictable as usually portrayed.
“Once you dig down and perceive the foundations . . . with extra granularity, there’s extra similarities with guidelines in different markets than individuals respect simply from studying headlines,” says Roberts, who has greater than a decade of expertise working in China.
He factors to artificial intelligence as one instance. The important thing laws 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 inner content material manufacturing and operational efficiencies. “Individuals assume that you simply can’t, as a multinational, use AI merchandise that you simply’ve developed in-house or certainly procured outdoors China and use these in China in any respect. Sure, you’ll be able to,” Roberts says.
He additionally believes Beijing is now “a lot better” at consulting with trade, together with multinationals, through the growth of latest tech laws. Linklaters has helped purchasers and commerce associations to “plug themselves into that session course of” and influenced the creation of guidelines that “truly work for a greater enterprise surroundings”, he says.
“There are many multinationals which might be very a lot ‘lengthy on China’ and, certainly, funding companies that I converse to on a day-to-day foundation which might be lengthy on China and see a variety of alternatives in China,” Roberts says.
