China’s mergers and acquisitions (M&A) market is poised for another year of growth as investors regain confidence in the country’s assets and long-term growth prospects, and look beyond geopolitical and economic headwinds, according to industry experts.
Investor optimism in 2026 would build on a deeper understanding of risks associated with regulatory restrictions, improved market conditions and success stories in the past year, said Kevin Yu Zhe, Shanghai-based partner at Zhong Lun Law Firm.
“It’s interesting to note how investors display a renewed sense of confidence in their ability to achieve synergy and elevate target businesses, even amid the complexities of geopolitical dynamics and macroeconomic challenges,” Yu said. “This shift in mindset could lead to a wave of strategic deals aimed at growth and resilience in the face of ongoing global challenges.”
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M&A activity in the world’s second-largest economy rebounded steadily in 2025 after a difficult period, with deal value expected to rise 13 per cent to about US$406 billion, according to a recent report by Bain & Co.
Strategic deals climbed 27 per cent year on year to US$301 billion as of November 25, while the number of transactions larger than US$30 million increased by 24 per cent. Financial investor-led deals surged 89 per cent during the period, though they remained a smaller contributor to the overall tally.
Other drivers of continued growth in China’s M&A market include Chinese companies’ push to capture overseas opportunities. Photo: Reuters alt=Other drivers of continued growth in China’s M&A market include Chinese companies’ push to capture overseas opportunities. Photo: Reuters>
Private equity funds have been able to recycle capital and return cash to investors through exits in Hong Kong’s rebounding initial public offering market.
“Investor appetite is improving, with private equity funds focusing more on deployment and actively looking at new deals,” said Stanley Lah, China strategy and transactions leader at Deloitte. “The market now has a clearer view on which areas are sensitive, enabling participants to handle the challenges with more experience.”
However, Lah cautioned that major policy shifts or geopolitical shocks could derail the momentum.
Other drivers of continued growth in China’s M&A market included companies’ push to capture overseas opportunities and recent regulatory easing that made it easier for listed firms to do deals, Yu said. “Sectors representative of Chinese firms’ technology innovation likely would be the main engines of China M&A, including automobile components and life sciences,” he added.
Both private and state-owned enterprises were pursuing globalisation, eyeing advanced manufacturing targets in Europe and consumer assets in Southeast Asia, Lah said.
Renewable energy and natural resources deals will also remain active. “Chinese companies are likely to continue to look for investments in mining and natural resources to fuel the Chinese economy,” said Liang Xu, partner at law firm Hogan Lovells. “If China’s relationship with the US [and] EU improves in 2026, we may see more cross-border deals, particularly between China and Europe, in the manufacturing and automotive sector.”
Meanwhile, multinational companies (MNCs) would continue rebalancing their Chinese portfolios, selling brands or seeking joint ventures in the consumer and automotive sectors, while others would make strategic investments in pharmaceutical and biotechnology firms, Lah said.
“MNCs are eager to participate in China’s technology transformation and innovation, highlighted by the DeepSeek moment,” Lah said. “Both Chinese and international private equity firms are increasingly willing to take on mature MNC joint ventures and disposal opportunities to transform and add value to those operations.”
In November, Starbucks announced a joint venture with Chinese alternative investment firm Boyu Capital to run its mainland retail operations. Restaurant Brands International also set up a joint venture with CPE to operate Burger King in China.
Challenges in China’s M&A market remain. “The pace of M&A will hinge on companies’ ability to figure out and execute successful transformation, integration and innovation, in contrast to the past focus on simply buying scale or establishing a network,” said Lah. “The level of justification required around value and the return profile is higher.”
Sensitive areas such as semiconductors have encountered hurdles. In December, Chinese supercomputer maker Sugon and chip designer Hygon Information Technology called off a planned mega-merger that had been under discussion for months, citing significant changes in the domestic and international market environments.
“M&A deals will continue to gravitate towards less sensitive areas to avoid valuation difficulties associated with potential geopolitical changes,” Lah said.
