Bain Capital expects pickup in China’s struggling private equity market

Bain Capital is expecting a recovery in China’s US$539 billion private equity market as early as this year, though the industry may struggle in reaching past levels of deal activity.

The market will benefit from a number of tailwinds, including the nation’s end of Covid Zero late last year, an expected recovery in consumer sentiment, and a rebound in Chinese stock markets, Jonathan Zhu, partner and co-head of Asia for Bain Capital Private Equity, said in an interview.

“You’ll probably see some recovery from what you’ve seen over the last couple of years,” Zhu said from Bain’s office in Shanghai. “My own guess is it’s a recovery to a lower level than what we saw before.”

Global investors had been slowing their investment in China’s private assets in the past few years amid concerns over the nation’s crackdown on the private sector, tension with the US and cooling economic growth. A downturn in the public market also had made it more difficult for PE investors to exit their investments. 

Aggregate capital raised by Greater China-based PE and venture capital fund managers fell to US$36.8 billion last year, research firm Preqin said in a Feb 13 report. That’s down from an average US$148.9 billion raised between 2019-2021. Greater China-focused PE assets under management reached US$539 billion as of June last year, according to Preqin. 

Bain, based in Boston, counts about US$160 billion in assets under management in areas including private and public equity, fixed income, credit, venture capital and real estate, its website shows.

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Zhu expects China’s economy will likely expand at a “significantly higher” rate this year, citing positives from Beijing’s support for the embattled property sector, eased restrictions on the Internet platform companies as well as the end of Covid lockdowns. 

The nation’s stocks have staged a “meaningful” recovery, he said, with the benchmark CSI 300 Index rebounding by as much as 20 per cent from late October. 

Inflation will not be as big an issue for China after its reopening since its economy isn’t synchronous with the rest of the world, he said. BLOOMBERG