After years of caution and capital outflows, Asia’s top private equity firms are turning decisively bullish on China, betting that Beijing’s technology-focused economic strategy and long-term industrial upgrades will reignite growth. The shift in sentiment marks one of the most notable reversals since global investors began pulling back from Chinese markets amid U.S.-China tensions and policy crackdowns.

At the Global Financial Leaders’ Investment Summit this week, several of the region’s most influential investors voiced confidence that China’s new five-year plan, emphasizing artificial intelligence (AI), automation, and advanced manufacturing, could spark a new cycle of private investment and innovation-driven expansion.

Investors Regain Confidence in China’s Industrial and Tech Future

Jean Eric Salata, chairman of EQT Asia, captured the mood among global investors, saying he is “bullish on China — and very bullish on Hong Kong as a result.” Salata highlighted Beijing’s renewed focus on industrial automation and AI-led modernization as key catalysts that could drive sustainable productivity gains.

Citing examples from China’s electric vehicle (EV) sector, Salata pointed to Xiaomi’s fully automated manufacturing plants, which rely heavily on robotics and AI to minimize labor costs. “It’s mind-blowing,” he said, noting how such developments exemplify China’s ability to commercialize new technologies rapidly and at scale.

His remarks come as Beijing’s economic planners accelerate efforts to achieve self-sufficiency in advanced industries, from quantum computing and hydrogen power to semiconductors and high-performance chips — a strategic pivot aimed at reducing reliance on Western suppliers.

AI Applications Seen as China’s Competitive Edge

Zhang Lei, founder and chairman of Hillhouse Investment, echoed Salata’s optimism, emphasizing that China’s strength lies not just in research and development but in its ability to apply AI technologies across industries.

“China will likely be the first to deliver much more on the AI application layers,” Zhang said, citing rapid product iteration, open-source model development, and a massive domestic consumer base that readily adopts new technologies.

Indeed, AI-driven innovation has already lifted growth projections for China in recent months. Major Wall Street banks, including Goldman Sachs and Morgan Stanley, have revised upward their GDP forecasts for 2026, citing momentum in the country’s tech, EV, and clean energy sectors.

Fred Hu, chairman and CEO of Primavera Capital, added that China’s massive electricity generation capacity — now exceeding 3.7 terawatts, three times that of the U.S. — will give the country an advantage in training and deploying large AI models. “The combination of infrastructure, talent, and capital is positioning China as a leader in the global AI revolution,” Hu said.

From Weak Fundraising to Portfolio Rebalancing

This renewed optimism marks a potential turning point for China’s private equity (PE) market, which has struggled with falling deal activity and dwindling foreign participation. According to PitchBook, PE firms completed just 93 deals in China through September 2025 — down sharply from 279 deals in 2024 and 562 in 2022. Fundraising has also dropped precipitously to $3.6 billion this year, compared with $23.6 billion the year prior.

Yet, industry leaders suggest this retrenchment may be bottoming out. As global investors seek diversification away from dollar-denominated assets, Asia — and particularly China and Hong Kong — is emerging as an attractive reallocation target.

“They’re looking at diversification,” Salata said. “Mainland China and Hong Kong are set to be major beneficiaries of that portfolio rebalancing.”

Looking Ahead: A Cautious Revival of China’s Capital Market

While challenges remain — including geopolitical uncertainty, export headwinds, and fragmented global supply chains — the tone among Asia’s top investors reflects a measured but growing conviction that China’s tech-centric economic transformation will pay long-term dividends.

For private equity firms, the opportunity lies not in speculative capital but in strategic partnerships with sectors tied to automation, AI, and green technology — all central to Beijing’s industrial policy. If these expectations hold, 2026 could see the first major rebound in Chinese dealmaking in nearly five years, restoring the country’s role as a cornerstone of Asia’s private capital markets.