Mid-year evaluation and projection for China’s M&A 2025
According to the report, in comparison to the same period previous year, China’s M&A increased by 45% to US$172 billion in the first half of 2025, driven by strategic domestic investments and key domestic transactions. The report predicts double-digit growth in 2025 due to State-Owned Enterprise (SOE) policy reforms, global corporations rearranging their portfolios, and private equity (PE) firms preparing for departures.
Strong growth in domestic strategic M&A more than quadrupled to US$108 billion, but PE (US$51 billion) and outbound transaction activity (US$11 billion) remained muted, while venture capital (VC) agreements also grew significantly. Domestic strategic and venture capital agreements increased by 17% and 23%, respectively, while PE deals decreased by 3%, inbound deals were low, and mainland outbound M&A deals decreased by 6%.
In 2025, 29 mega-deals (>US$1 billion) were signed, with 20 domestic strategic deals, driven by SOEs, with high technology, healthcare, and industrials performing better. Deepseek AI’s launch in 2025 boosted the tech sector, Initial Public Offering (IPO) activity, and value chain integration among major China A-share SOEs, despite low strategic inbound M&A. Growth drivers by sector included areas like natural resources and high technology, particularly semiconductors, which reflected government goals.
In the first half of 2025, domestic strategic M&A activity surged, with twenty mega-deals exceeding US$1 billion, primarily in high-tech, healthcare, and industrial sectors. The deal’s worth has more than quadrupled to nearly US$100 billion annually.
Financial services also demonstrated strong performance in one major transaction. China’s long-term M&A market shows consistent improvement in half-year deal volumes over the past 2.5 years, despite lower deal values compared to peak levels between 2016 and 2021.
Venture capital agreements reached a historic high in the first half of the year, driven by investments in technology industries like artificial intelligence and robotics. Private equity funds’ exits also saw growth, with most firms using M&A deals as their main exit strategy. Positive momentum is also being shown by exits through listing on the Hong Kong Stock Exchange (HKSE), which is expected to have its best year in ten years.
In H1 2025, Chinese mainland corporations’ outbound M&A remained poor, but a revival was seen with three mega-deals in European markets, making Europe the top foreign investment destination. M&A activity is expected to grow in the second half of the year due to positive indicators of China’s economic progress, pent-up demand, and increased private equity projects, as well as China A-share listed firms’ expansion and skill acquisition.
The Hong Kong capital market’s improved performance could boost prices and exit routes, while China’s increasing foreign investment demand and multinational corporations’ strategy reassessment in China could lead to more deals. China’s M&A market is expected to surge in the second half of 2025 due to increased demand, PE exits, and improved capital market confidence.
PE fundraising decreased slightly in 2024, but remained higher than nine years prior, with a noticeable shift towards domestic renminbi-denominated fundraising over offshore US$. Venture capital investment remains strong, with volumes increasing and remaining at historical levels due to investments in advanced technology like AI, robotics, and AI-enabled apps.
PE-backed IPO activity was softer in the Chinese mainland, though improving in Hong Kong. PE exit activity was robust, with sponsors leveraging improving economic trends and sentiment as well as a step-up in valuations. Trade sales made up most of PE exits.
Although PE-backed initial public offerings (IPOs) have stayed at historically low levels in Mainland China, the HKSE is poised to achieve its greatest performance in the past ten years, as shown by the number of PE-backed listings, as an alternate exit route.
Chinese mainland outbound M&A activity fell with only three mega-deals in the UK, Germany, and France, despite indications of increased interest. Europe remained the most significant destination in terms of transaction value, surpassing Asia and North America.
The launch of Deepseek AI in early 2025 stimulated the tech sector and economy, while Hong Kong Stock Exchange valuations and value chain integration increased. Domestic strategic M&A continued to rise, driven by natural resources and high technology, particularly semiconductors.
PE funding has slightly decreased from 2024, but both years are still strong compared to the previous nine years. The trend towards domestic renminbi-denominated fundraising is still visible. In the first half of 2025, only six mega-deals involving financial sponsors occurred, but new investments have declined due to geopolitics, economic conditions, and valuation gaps.
Venture capital investment remains strong due to investments in AI, robotics, and AI-enabled applications. Most exits were trade sales, with PE-backed IPO activity softer in the Chinese mainland.
China M&A market prospects in 2025 face challenges like uncertainties, geopolitics, and limited foreign investment. Positive factors include economic recovery, increased stock market values, and increased demand for M&A activity.
