China private equity and venture capital
Too big to ignore.
China’s private equity and venture capital (China PE/VC) market is large and growing, and currently represents the second largest PE/VC market in the world.
We believe an allocation to China PE/VC can add value within a broader global PE/VC portfolio by enhancing returns and diversification. In addition, it provides exposures in high-growth companies that are not fully accessible via Chinese public equity or other asset classes.1
The fundamental drivers behind the growth in the China PE/VC market lie in the country’s rising consumption power and its focus on innovation. China’s private consumption is forecast to more than double to about $14 trillion by 2030, matching the current size of US private consumption.2 Furthermore, China has a developed ecosystem of talent and capital resources that supports research and innovation as the country transitions from ‘the world’s factory’ to a ‘high-tech innovator.’ This represents a favorable backdrop for PE/VC managers to fund companies that capitalize on China’s evolving consumption trends and opportunities across industries to enhance productivity and innovation.
Investing in China PE/VC is more complicated than investing in developed markets PE/VC. On top of being a dynamic market with frequent new manager spin-outs, investors also need to consider geopolitical, regulatory and other risks, which present both opportunities and threats. Building a successful China PE/VC program requires deep local market expertise and access to quality managers.