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 individuals 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 firms and now President Donald Trump’s commerce conflict, detrimental sentiment has abounded.
And but, on the bottom on the earth’s second-biggest financial system that can also be a high-tech manufacturing powerhouse, some legal professionals and different advisers nonetheless take into account 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 companion with JunHe, considered one of China’s high legislation companies, who has been concerned with among the greatest non-public fairness offers recorded in China.
A few of the merger and acquisition exercise is the results of rising geopolitical tensions, as multinational firms act to shift their enterprise out of China. However transactions have additionally continued for extra sanguine causes, and teams of Chinese language traders — akin 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 fuel unit, Yingde, to a Chinese language consortium. Based on 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 non-public fairness investor. “For them it was a really regular exit,” says an individual acquainted with the deal.
Individually, Spain-based healthcare large Grifols bought 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 consumers earlier than Haier secured the deal.
Statistics on China’s M&A developments, launched this 12 months by PwC’s China workforce, 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.
Nevertheless, 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 “constructive” indicators, together with: pent-up demand for investments; numerous non-public fairness initiatives in search of exits; rising demand for abroad investments by Chinese language capital; and a few massive transactions stemming from the reform of China’s state-owned enterprises.
From the angle of home traders, some inexperienced shoots will also be detected by way of the rise of a bunch of firms 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 sequence of measures aimed 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, traders from Europe, south-east Asia and the Center East stay extremely curious about China. However US traders, 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 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 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 private security of China-based workers, but additionally considerations across the threat of falling foul of the numerous security-focused laws referring to expertise, information and privateness.
Alex Roberts, head of Linklaters’ China expertise, media and telecommunications workforce in Shanghai, argues that the regulatory atmosphere 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 admire 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. “Folks 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 possibly can,” Roberts says.
He additionally believes Beijing is now “a lot better” at consulting with business, together with multinationals, throughout 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 “really work for a greater enterprise atmosphere”, he says.
“There are many multinationals which might be very a lot ‘lengthy on China’ and, certainly, funding companies that I communicate to on a day-to-day foundation which might be lengthy on China and see quite a lot of alternatives in China,” Roberts says.
