China’s 2025 outbound investment outlook

The global M&A market has been in decline since 2022, following a record-setting surge in 2021. The downturn was primarily driven by rising interest rates, economic uncertainty, and geopolitical tensions. China’s M&A market is no exception. Since the COVID-19 pandemic, the Chinese economy has faced unprecedented challenges, including slowed GDP growth, weak consumer spending, an ageing and declining population, ongoing political and trade tensions with the West, and debt burdens borne by the state and local governments.

In 2024, China’s M&A market witnessed an all-time low in nearly a decade with a 16% decline in transaction value, dropping to US$277 billion, the lowest in a decade¹. China’s outbound M&A also experienced a significant decline, decreasing by 31% year-on-year to US$ 30.7 billion².

Six and a half months into 2025, according to deal data collected by Mergermarket, a total of 63 China outbound M&A transactions have been completed, with an aggregate deal value of ~US$15 billion³.

Looking ahead, the market remains cautiously optimistic, with expectations of a modest recovery given positive factors such as improved economic outlook, pent-up M&A demand, favourable government policies and global interest rate reductions. The following trends will likely continue to drive China’s outbound M&A during and beyond 2025.

Rising geopolitical tensions between China and Western countries, coupled with tariff uncertainties, are shifting Chinese investment strategies.

• Intensifying tariff disputes and geopolitical friction have made it more difficult for Chinese investors to operate in certain regions, particularly the United States and Europe, and in sensitive industries such as AI, semiconductors, and quantum computing. As a result, investment options have narrowed, prompting a redirection of capital toward alternative geographies.
• In response, Chinese companies are increasingly using acquisitions as a strategic tool to navigate these challenges. Some are targeting foreign entities with operations in regions that face lower tariffs and already possess export licenses, allowing continued access to key markets like the U.S. and Europe. Manufacturing firms, in particular, are showing growing interest in acquiring production facilities in regions such as the Middle East, South America, and North Africa, where U.S. tariffs are relatively low.
• Additionally, Chinese investors are shifting their focus to regions seen as geopolitically neutral or investment-friendly such as Hungary, Türkiye, Morocco, Thailand, Malaysia, Saudi Arabia, and the UAE. These countries offer incentives like tax breaks, subsidies, and supportive regulatory frameworks, alongside more stable and favourable policies toward Chinese capital⁵.

Ongoing reforms in state-owned-enterprises (SOEs) are expected to drive significant M&A activity, as the Chinese government seeks to streamline and strengthen these entities. Selected SOEs actively pursuing high-performing foreign assets to enhance profitability, diversify risk, and secure long-term growth.

• For instance, Zijin Mining, a leading Chinese mining SOE engaged in exploration and extraction of metals such as copper, gold, zinc, lithium and silver, completed its 100% acquisition of Newmont Golden Ridge Ltd, a Ghana-based mine-to-market company engaged in the exploration and mining of gold for €991 million in April 2025. This aligns with China’s broader strategy to secure critical minerals for its supply chain in various sectors.
• CNPC, one of Asia’s largest oil producers, is reviving its global deal-making activities with a focus on LNG and deep-sea drilling projects⁴. Meanwhile, other state-owned oil giants, such as Sinochem are divesting non-core overseas assets in Brazil and the Unites States. Overall, Chinese national oil companies are shifting their strategy toward acquiring high-value, strategic assets rather than pursuing broad-based M&A. Satsangi, Deutsche Bank’s co-head of M&A, Asia Pacific, expected to see a resurgence of outbound activity by state-owned companies in China that are searching for renewable and natural resources assets globally.
• This aligns with feedback from Clairfield International’s intermediary network in China, where local M&A advisors report a recent uptick in cross-border acquisition activity driven by SOEs.

China’s outbound investment strategy emphasises localised production hubs, industrial upgrades, and partnerships to modernise industries and integrate into global supply chains.

• Strategic sectors such as electric vehicles (EVs), renewable energy, semiconductors, technology and infrastructure are expected to continue to attract Chinese interests and capital.
• Overall, Chinese investors are recalibrating their outbound strategies by engaging more actively with emerging economies that offer policy predictability, industrial ambition, and strategic alignment. This pivot is underpinned by the rising importance of key geographies, including Hungary, Türkiye, Morocco, Malaysia, Saudi Arabia, and Thailand, which are rapidly becoming focal points for Chinese investment in high-growth sectors such as new energy, semiconductors, and digital infrastructure⁵.
• Similarly, Middle Eastern nations, particularly Saudi Arabia, are seeking Chinese partnerships to develop their technology, e-commerce, and renewable energy sectors as part of broader economic diversification efforts⁵.

Government policy incentives are expected to encourage deal making in 2025.

• Regulatory Reforms to Facilitate M&A Activities: In September 2024, the China Securities Regulatory Commission (CSRC) introduced new measures to guide mergers and acquisitions among listed companies. The CSRC emphasised its commitment to actively supporting listed companies in pursuing M&A activities centred around strategic emerging industries and future industries. It also aims to channel more resources toward new quality productive forces. Additionally, it encourages listed companies to enhance industrial consolidation. These reforms are expected to encourage outbound M&A activities⁶.
• Support for Belt and Road Initiative (BRI) Investments: The BRI has been a focal point for outbound investments, with Chinese companies directing substantial funds towards infrastructure and development projects in participating countries. In 2024, investments in BRI partner countries saw a 5.4% year-on-year increase to US$ 51 billion in investments5. The 2025 level is expected to remain roughly the same. While BRI investments do not directly translate into M&A deals, the high level of capital flow is a positive factor for potential M&A activity.

Conclusion

In 2025, China enters its 15th Five-Year Plan period, which will span from 2026 to 2030 and is expected to focus on enhancing economic resilience and strengthening the country’s technological and innovation capabilities. While challenges remain, the market is cautiously optimistic about the outlook for China’s outbound M&A activity in 2025, with a projected increase in both deal value and volume. This growth is anticipated to be driven by lower interest rates, an improving economic environment, strategic policy initiatives, and sectoral consolidation. As for how the final statistics will shape up, only time will tell.

Notes

1. PwC China. 2. Ernst & Young Greater China. 3. Mergermarket (Aggregate deal value excludes the values of 23 deals, where deal value data is not announced and likely very small). 4. Reuters 5. China Briefing (from Dezan Shira and Associates) 6. The Republic of China State Council announcement (english.gov.cn)