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The Chinese market has fallen out of favor, and private equity firms in China are in trouble | Investments | The Epoch Times

[Великая Эпоха, 14 ноября 2023 г.](Detailed report by Epoch Times reporter Li Yan) In just twenty yearsprivate placementCapitalThe company has amassed more than $1.5 trillion in assets in China. Now they are trying to shake off those once-high hopes.investproject.

Over the past few years, as China’s economy has struggled to recover and concerns have grown over the party’s political direction,investDemand for Chinese assets has plummeted, and even capital outflows from the open market have reached record levels. Buyout firms are exploring private sales amid weak public markets and unattractive valuations, including the likes of Blackstone-backed PAG and Carlyle Group Inc.

Data compiled by Bloomberg shows China is involved inprivate accommodationCapitalThe company’s sales are expected to fall for the second year in a row after falling 50% last year.

Bloomberg reported Niklas Amundsson, a partner at global private equity firm Monument Group, as saying: “China has fallen completely out of favor and global investors will put China on hold for the time being.”

CEO: China’s capital remains tense

These are tough times for private equity firms that were once bullish on Chinese investment.

Hong Kong-based PAG, which has $50 billion in assets and is focused on Asia, has been trying for months to launch a tender offer for about $1 billion in assets in previous funds. Carlyle Group and Trustar Capital are trying to partially exit their investments in McDonald’s operations in Hong Kong and mainland China, people familiar with the matter told Bloomberg.

Zhang Yichen, chief executive of Trustar Capital, a private equity fund owned by Citic Capital Holdings, said last week that the Chinese economy will take time to shake off its troubled real estate sector. At the same time, he believes that China’s economy will be very difficult next year, and financing will continue to be very tight.

Conversely, clients are showing greater interest in deal financing opportunities in other regions outside of China, such as India, Vietnam, South Korea, Australia and Japan. The US is a major destination where revenues are already surpassing those in Asia.

A Cambridge Associates report released March 31 found that for funds launched in 2021, the average U.S. investment return was 11.2%, based on portfolio company cash flow. By comparison, for emerging market funds that focus primarily on the Asia-Pacific region, this figure is 6.1%.

The US continues to reduce investment in China

At the same time, the United States is further reducing its investment in China.

Reuters reported that two US senators introduced a bipartisan bill last Thursday (Nov. 9) that would require private equity firms to disclose the extent of their investments in China and other related countries.

The bill, introduced by Democratic Sen. Bob Casey and Republican Sen. Rick Scott, is the latest attempt to track U.S. investment in China.

“The American people deserve to know where and how their savings are being invested,” Casey said in a statement.

Casey’s office said U.S. private equity firms poured more than $80 billion into China between 2018 and 2022, including through pension plans.

A new congressional measure would require private equity funds to annually disclose to the U.S. Securities and Exchange Commission (SEC) their investments in China, Iran, Russia and North Korea, and then require the SEC to issue public reports based on that information.

“Our adversaries, like communist China, benefit from a system that completely lacks transparency,” Scott said in a statement. “It’s time to stop sending dollars to these troublesome countries.”

Casey also co-sponsored a measure requiring the government to account for investments in certain sensitive areas of Chinese technology. The measure was added as an amendment to the Senate National Defense Authorization Act (NDAA).

On August 9, the White House issued an executive order banning U.S. private equity and venture capital firms from investing in Chinese high-tech companies in three areas: semiconductors and microelectronics, quantum information technology and certain artificial intelligence systems.

Responsible Editor: Lin Yang#

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