Private Equity Firms Face Exit Challenges in China

Global private equity firms are struggling to cash out of investments in China, with a significant lack of completed divestments in 2025. This difficulty highlights the ongoing challenges of the Chinese market and the broader pressures on exit strategies worldwide.

Stalled Exits and Global Pressures

Ten of the largest buyout firms with investments in China – including KKR, Blackstone, and CVC Capital Partners – reported zero publicly disclosed complete divestments from mainland Chinese portfolio companies in 2025, according to data from PitchBook and Dealogic.¹ This standstill occurs as the private equity industry globally faces headwinds in selling investments and realizing past gains due to higher interest rates and increased competition.¹

Matthew Phillips, mainland China and Hong Kong financial services leader at PwC, notes the pressure on global exits and the need for China teams to contribute to overall returns. This has created a “backlog” of unrealized investments.¹

China’s Challenging Business Environment

The dearth of exits underscores the difficulties foreign investors face in China, despite efforts to ease trade tensions between Washington and Beijing. The stalled exit pipeline also hinders the ability of investors to reinvest funds into other markets.¹

While some firms have made partial sales, these have largely gone unreported. Three private equity groups, including Warburg Pincus and two others who requested anonymity, confirmed partial sales of Chinese assets in 2025 that were not publicly disclosed.¹

Innovative Exit Strategies and Market Discounts

Faced with difficulties in returning capital to investors, private equity firms are exploring alternative strategies, including selling companies to themselves and increasing secondary sales of fund stakes.¹

The Chinese private equity ecosystem is experiencing a significant liquidity gap.¹ Discounts on Chinese funds have been substantial, with reductions of 40-50% common over the past two years.¹ This contrasts with average discounts of 14% for European assets, 12% for North America, and 44% for Asia as a whole, according to a Jefferies report.¹

Shifting Investment Focus

Despite the challenges in exiting existing investments, some firms are continuing to raise fresh capital for Asian investments. EQT anticipates raising $14.5 billion for its latest pan-Asian fund in 2026.¹

Investment focus is shifting towards markets like Japan, where corporate governance reforms and a weaker yen are attracting foreign investment, and India, which presents new opportunities.¹

Emerging Opportunities in AI and Hong Kong IPOs

There are signs of a potential market turnaround, driven by growing interest in China’s artificial intelligence sector. Bain Capital completed the sale of its China data center business, Chindata, for $4 billion to a consortium led by a Chinese industrial company and local government funds in January, marking the first major portfolio sale by a global PE house in two years.¹

The resurgence of the Hong Kong stock market, with approximately $35 billion in listings in 2025, has facilitated exits for some venture capital-style investments. EQT and Carlyle have both successfully exited investments through Hong Kong IPOs.¹

Strategic vs. Capital Market Exits

Stephanie Hui, head of private equity in Asia for Goldman Sachs, suggests that capital markets may not be the optimal exit route for buyout deals in China, emphasizing the need for broader market consensus on pricing. She contrasts this with strategic sales or sales to other sponsors, which can be more akin to art transactions, requiring only a few interested buyers.¹

Key Takeaways

• Private equity firms faced significant challenges exiting investments in China in 2025.
• Global pressures on exits, coupled with China’s unique business environment, contribute to the difficulties.
• Firms are exploring innovative exit strategies, including secondary sales and self-liquidations.
• Investment focus is shifting towards markets like Japan and India, while opportunities in China’s AI sector are emerging.

¹https://pe-insights.com/blackstone-cvc-and-kkr-circle-siemens-healthineers-e6bn-diagnostics-unit/