Studying headlines about enterprise in China prior to now 5 years, overseas observers may be forgiven for pondering the nation of 1.4bn individuals is now 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 conflict, unfavorable sentiment has abounded.
And but, on the bottom on the earth’s second-biggest economic system that can 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 quite a lot of alternatives right here,” says Joe Chen, a Shanghai-based associate with JunHe, certainly one of China’s prime regulation corporations, who has been concerned with a few of the greatest 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 — resembling insurers, a few 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 line with studies, 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 aware of the deal.
Individually, Spain-based healthcare large Grifols offered a 20 per cent stake in blood merchandise producer Shanghai RAAS to Chinese language client 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 traits, launched this yr by PwC’s China staff, paint a blended 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 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. When it comes to the outlook, the agency additionally noticed some “optimistic” indicators, together with: pent-up demand for investments; a lot of personal fairness tasks 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 attitude of home buyers, some inexperienced shoots may also be detected by way of the rise of a gaggle 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 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 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 conflict, buyers from Europe, south-east Asia and the Center East stay extremely curious about 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 get well 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 concentrating on the China operations of US consultancies and due diligence corporations, together with Mintz Group, Bain & Co and Capvision. It highlighted not solely fears over the private security of China-based employees, but in addition issues across the danger of falling foul of the various security-focused laws regarding expertise, information and privateness.
Alex Roberts, head of Linklaters’ China expertise, media and telecommunications staff in Shanghai, argues that the regulatory atmosphere is neither as opaque nor as unpredictable as typically portrayed.
“If 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 inside content material manufacturing and operational efficiencies. “Individuals suppose that you just can not, as a multinational, use AI merchandise that you just’ve developed in-house or certainly procured exterior China and use these in China in any respect. Sure, you may,” Roberts says.
He additionally believes Beijing is now “a lot better” at consulting with trade, together with multinationals, in the course of the improvement of latest tech laws. Linklaters has helped shoppers and commerce associations to “plug themselves into that session course of” and influenced the creation of guidelines that “really work for a greater enterprise atmosphere”, he says.
“There are many multinationals which are very a lot ‘lengthy on China’ and, certainly, funding corporations that I communicate to on a day-to-day foundation which are lengthy on China and see quite a lot of alternatives in China,” Roberts says.
