European funds rediscover Chinese private equities

Long-term investors like European pension funds are reportedly re-exploring Chinese private equity investments, as foreign capital returns amid a frenzy in China’s tech sector.

Global investors are inquiring about China opportunities with private equity firms such as Carlyle Group, Warburg Pincus, and PAG, according to a Bloomberg report citing people familiar with the matter.

While this growing interest has not yet translated into substantial capital deployment, it marks a stark contrast to recent years, according to the report.

Previously, funds flowed to other Asian markets due to heightened geopolitical tensions and China's regulatory crackdowns. Now, enthusiasm is returning as China's market shows renewed vigor from tech breakthroughs and an improved economic outlook, coupled with some capital shifting away from the US.

Michael Hu of Germany's HQ Capital noted that investment attitudes towards Asia and China have indeed become more open. However, the path back to private equity's former heights in China remains challenging.

Since 2022, the industry has collectively reassessed its China strategy. Major firms like KKR, Carlyle, and Blackstone paused or scaled back deals. Bain & Co. data shows these top firms were involved in just 6 percent of China deal value in 2024, far below the 24 percent average from 2018-2023.

However, North American investors largely remain opposed to China investments, the sources said. Some European investors, particularly from Scandinavia, also stay hesitant, influenced by the Ukraine war and concerns that investments could be seen as indirectly supporting Russia.

Nevertheless, a slight shift is emerging. Recent US tariff policies have partly stimulated fresh interest in China as some investors seek diversification away from the US. One US investor also linked the inquiries to expectations that Washington might ease some outbound investment restrictions.

Despite these signs of warming interest, sources caution that capital commitments will stay limited until investors see a series of large-scale investments and successful exits in China—the key signals for a genuine market recovery.