Chinese state funds pull back from US private equity amid trade war

Chinese sovereign wealth funds have invested billions into leading US firms such as Blackstone, Carlyle Group, TPG, Vista Equity Partners, and Thoma Bravo

Chinese state-backed investment funds are halting new investments in US private equity firms in response to growing tensions triggred by President Donald Trump’s intensifying trade war, The Financial Times reported on Monday. 

Chinese state-backed funds have paused investments in US-based private capital firms in recent weeks due to pressure from the Chinese government. Some Chinese funds are attempting to avoid exposure to US-based companies altogether, even when investments are made through buyout groups headquartered outside the United States, the report said, citing seven private equity executives familiar with the matter.

 

This retreat comes amid the mounting trade war between the two nations, with Washington slapping duties of up to 145 per cent on Chinese goods and Beijing responding with tariffs of up to 125 per cent on American exports. The latest escalation has cast a shadow over global capital flows, particularly in the private equity space.

 

 

 

Chinese wealth funds invested billions into US firms

Chinese sovereign wealth funds, including China Investment Corporation (CIC) and the State Administration of Foreign Exchange (SAFE), have historically been key players in US private equity, investing billions into leading firms such as Blackstone, Carlyle Group, TPG, Vista Equity Partners, and Thoma Bravo. These investments played a crucial role in propelling private equity into a $4.7 trillion global industry. CIC, the country’s largest sovereign wealth fund, had already been slowing its investments in US private equity in recent years, choosing to diversify its portfolio to other international markets. 

As direct investments by Chinese state entities face growing scrutiny in the West, indirect investments via private equity funds have remained a viable route for Beijing to maintain exposure to the US and European economies. However, the current geopolitical climate seems to be prompting a rethink.  ALSO READ | Trump signals cutting China tariffs 'substantially' if trade deal reached

 

These geopolitical tensions have prompted not only China but also Canadian and European pension funds to reassess their position as trade relations with the US remain unpredictable