Private equity in China: five charts that show what investors could be missing

Jun Qian, Head of Investments China

Growth projections for the coming decade still show the Chinese economy outstripping every developed market in the world. We believe the private equity market is compelling for investors looking to capitalise on this growth.

Here are five reasons why.

Figure 1: China’s PE fund raising accounts for a third of global PE fund raising

Global vs. China private equity fundraising ($bn)

China is the world’s second largest private equity (PE) market and accounted for approximately one-third of global private equity fund raising in 2019.

But most investors allocate a small fraction of that to the market itself. China’s private market is significantly underrepresented in investors’ portfolios.

That looks set to change.  As Chinese financial markets open up, foreign investors are starting to seize upon  the many opportunities.

Figure 2: China is becoming increasingly accessiblemore industries are opening to foreign investeros

For example, figure 2 shows that in 2015, 17% of the country’s industries were either restricted or prohibited for foreign investors. In 2020, that figure has shrunk to a mere 6%.

In addition to the easing of ownership restrictions in certain industries, there are initiatives such as qualified foreign limited partnerships (QFLP). These are being introduced to manage cross-border capital flow restrictions.

QFLP is a particularly attractive way for foreigners to access the large and fast-growing RMB-denominated PE market (which is the dominant source of PE capital in China).

Figure 3: RMB funds now a dominant source of private equity capital

China PE market fund raising 2007-2019

Traditionally foreign investors have gravitated towards USD-denominated funds that have been raised by foreign or domestic managers. But this market is dwarfed by the RMB market.

Figure 4: Number and proceeds from Great China IPOs much bigger than US

Greater China stock market already surpasses US stock market in number of IPO

There is also an increasing range of exit options for Chinese PE companies. One common exit strategy is to take the company public by listing it on the stock market in an initial public offering (IPO). 

As the chart above shows, the number of IPOs in Greater China has grown by 48% between 2019 and 2020. Over the same period in the US, growth was more than half this. While the proceeds from these IPOs grew faster in the US than in China between 2019 and 2020, total proceeds are significantly higher in China.  

Figure 5: More Chinese companies are choosing domestic stock market for IPO listing

Chinese companies's number of dosmestic/overseas IPOs

IPOs have become an established way for PE-backed Chinese firms to exit the private market, particularly because pre-profit companies are now allowed to list in China.

In fact, 90% of PE exits are via IPO which means Chinese companies now account for almost half of global IPOs worldwide (by number).

Within those IPOs by Chinese companies, a majority of them list in China and over 65% of those domestic IPOs are PE-backed. Chinese companies are those with headquarters or their main business in China.


Important Information
The contents of this document may not be reproduced or distributed in any manner without prior permission.
This material contains information on Fund that is not authorised by the Securities and Futures Commission of Hong Kong (the “SFC”) pursuant to section 104 of the Securities and Futures Ordinance (“SFO”). No offer shall be made to the public of Hong Kong in respect of the unauthorised Fund. Such unauthorised Fund may only be offered or sold in Hong Kong to persons who are “professional investors” as defined in the SFO (and any rules made under the SFO) or in other circumstances which do not otherwise contravene the SFO. In addition, this material may only be distributed, circulated or issued to persons who are “professional investors” under the SFO (and any rules made thereunder) or as otherwise permitted under the Hong Kong laws.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect nor is it to be construed as any solicitation and offering to buy or sell any investment products. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Any security(ies) mentioned above is for illustrative purpose only, not a recommendation to invest or divest. Opinions stated are valid as of the date of this document and are subject to change without notice. Information herein and information from third party are believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. You may not get back the full amount invested. Derivatives carry a high degree of risk. Exchange rate changes may cause the value of the overseas investments to rise or fall. If investment returns are not denominated in HKD/USD, US/HK dollar-based investors are exposed to exchange rate fluctuations. Please refer to the relevant offering document including the risk factors for further details.
This material has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.


Our business is structured around a number of strategic capabilities, which combine to meet a variety of client requirements. Please visit the Strategic Capabilities - Private Assets page to discover how we access the specialist investment opportunities.

Contact Us

Level 33, Two Pacific Place,
88 Queensway,
Hong Kong
(852) 25211633
Online enquiry: Please complete the web form below and
we will reply as soon as possible.
Contact us