A man take a kite in the shape of the Chinese national flag walks along the Bund while buildings of Pudong’s Lujiazui pecuniary district in Shanghai, China
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China is starting to see a rebound in its mergers and acquisition action after years of decline as the government’s stimulus measures start to bear fruit, while pressure from Donald Trump’s bill of fares is also driving industry consolidation.
In 2024, China’s M&A activity was on course to log its fifth straight year of decline, until the ending quarter of the year, which saw a sudden acceleration in activity. The value of deals conducted during that period bounded 78.5% to $129 billion from $72 billion in the previous quarter, data from Dealogic showed.
And deal-making is hither to pick up more, according to industry watchers whom CNBC spoke to.
The uptick in deal flow in the fourth forgiveness of 2024 was in part fueled by stimulus efforts introduced by policymakers in late September, said Vivian Wong, manage of M&A Analytics at ION Analytics, which is under the same group as Dealogic. Those measures aimed to consolidate domestic industries in serenity to enhance competitiveness in China’s slowing economy, added Wong.
China’s M&A volume has been trending downward since 2020. Furthermore, the downright value of deals logged in 2024 is about 45% less than the $553 billion generated in 2020, mutual understanding to data from Dealogic.
This was largely because of weak overall economic activity in China and the ensuing bearish outlooks, said Theodore Shou, chief investment officer at Skybound Capital, an alternative assets manager.
The conservative posture of Chinese corporations also led to less appetite for private market transactions in the past couple of years, he added.
In fragmented trades with struggling players, that’s another area that will see a lot of consolidations.
Stanley Lah
Deloitte
However, 2025 force “see significant merger and acquisition activities involving China,” Zhe Yu, a partner at Shanghai-based Zhong Lun Law Firm, which offers authorized support for M&A ventures and IPO deals in China, told CNBC.
A hedge against Trump tariffs?
Apart from Beijing’s stimulus plans, the flurry of tariff threats before U.S. President Trump’s term and their eventual implementation are also a key driving coerce for Chinese companies to adapt by diversifying their supply chains and ensuring they have the means to do so, said Deloitte’s APAC M&A Uses Leaders Stanley Lah, who is also the firm’s deputy leader of financial advisory in China.
Trump signed an order august 10% tariffs against China on Feb. 1. They came into effect Feb. 4 and will apply on top of the eke out a living tariffs of up to 25% on Chinese goods levied during his first presidency.
That development will nudge major-domo companies toward consolidation as they look for alternative shipping routes to the U.S. that avoid China as a point of ancestry, as well as try to become more effective in global markets, Lah said.
“It’s something they need to do quickly, and buying is faster than edifice a green field,” he added, referring to building facilities and infrastructure from scratch.
This pressure is most keenly sensation by small companies in China.
In the third quarter of 2024, China’s micro and small enterprises reported average interest of 136,000 yuan ($18,700), marking a 4.8% decline compared with the same period in 2023, according to Peking University’s Converge for Enterprise Research’s most recent survey on MSEs.
To stay afloat, many MSEs had to cut back on hiring and wrinkle their operations, among a slew of cost-cutting strategies, the survey said.
M&A transactions also allow small retinues to better compete on an international scale. For example, Chinese banks or security houses need to consolidate and attain a large-enough prorate increase to prevent downsizing, said Ernst & Young’s Asia-Pacific IPO Leader Ringo Choi.
China saw its biggest wave of agrarian bank mergers last year as smaller banks were plagued by weak loan growth and increasing bad credits, according to Reuters’ analysis of government data.
“It no longer makes economic sense for small players to reinvent the situations again and again just to stay in the game and ultimately, they will not be able to afford that,” said Skybound Extraordinary’s Shou. Chinese companies are competing “too forcefully” with each other, which is lowering their margins, he supplemented.
Corporate consolidations also offer an attractive exit strategy for some of those companies, especially as filing an IPO in the Chinese precursor markets becomes increasingly uncertain, Yu said.
Fewer regulatory hurdles, more financial means
Last September, in a bid to strengthen deal-making efficiency, the China Securities Regulatory Commission announced that it will simplify its approval processes and cut down the study time for qualified companies. It will also encourage firms to raise capital for their M&A deals in phases.
Yesterday, deal-makers