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Chinese state-supported investment funds have ceased new investments in American private equity firms due to escalating tensions exacerbated by President Donald Trump’s trade war, as reported by The Financial Times on Monday. In recent weeks, these funds have paused their investments in US-based private capital firms under pressure from the Chinese government.
Some funds are even seeking to completely avoid exposure to US companies, even when investments are made through buyout firms located outside the United States, according to insights from seven private equity executives familiar with the situation. This withdrawal occurs amidst the intensifying trade conflict between the two countries, with Washington imposing tariffs of up to 145 percent on Chinese products, while Beijing retaliates with tariffs reaching 125 percent on American exports.
This latest escalation has cast a pall over global capital movements, particularly within the private equity sector. Historically, Chinese sovereign wealth funds, such as the China Investment Corporation (CIC) and the State Administration of Foreign Exchange (SAFE), have been significant investors in US private equity, pouring billions into prominent firms like Blackstone, Carlyle Group, TPG, Vista Equity Partners, and Thoma Bravo.
These investments have been instrumental in transforming private equity into a $4.7 trillion global industry. CIC, the largest sovereign wealth fund in China, has already been reducing its investments in US private equity in recent years, opting to diversify its portfolio into other international markets. As direct investments by Chinese state entities come under increasing scrutiny in the West, indirect investments through private equity funds have remained a feasible avenue for Beijing to sustain its exposure to the US and European economies. Nevertheless, the current geopolitical landscape appears to be prompting a reassessment.
