Private credit investors’ opportunities in China are shifting from the property market to technology sectors, including green-solution businesses, according to Bo Hu, head of private credit Asia at HSBC Holdings. 

Financial technology and healthcare, in particular, are the sectors to watch in the next 18 months, as the world’s second-largest economy faces an aging population, she said. 

“Investors are a lot more diversified in their view on the investment opportunities going into China,” she added.

China was an integral part of Asia’s private lending market, but the unprecedented property debt crisis has pushed many investors to pull back on their exposure to the country. With lower borrowing costs in China, private credit lenders also face more challenges for deals onshore.

Yields in private credit in China are still insufficient for many investors, said Jenny Sun, founder and chief investment officer at Blue Mountain Bridge Capital, adding her firm is instead focused on Hong Kong this year.

China may be more attractive for investors in 2025 and 2026, she said. 

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Private credit investors still looking into China are pivoting to less-leveraged sectors with better growth prospects, which include consumer, digital and data sectors.

Schroders, an asset management firm, is focused on Chinese consumption businesses and Internet platforms for investment opportunities 2024, according to its report late last year.

Asia-Pacific makes up only a fraction of the US$1.7 trillion private credit market worldwide, according to data from research firm Preqin. But the region’s rate of growth has outpaced that of others.

Given geopolitical tensions, “a lot of the larger Western firms are inactive at the moment in Greater China”, said Jeffery Lau, partner and head of private credit and special situations at Primavera Capital Group.

“As a result, we see basically a yield pickup across the spectrum of opportunities in private credit.” Bloomberg