FT | China's PE exit drought hits global investment giants

What's new: Top private equity firms have been unable to sell or list their Chinese investments in 2023 - the first time this has happened in over a decade.

Why it matters: Buyout groups need to exit investments within 3-5 years to generate returns for pension funds and investors. The current situation has effectively trapped billions in capital with uncertain future returns.

The big picture: Major PE firms invested $137 billion in China over the past decade but only managed to exit $38 billion of those investments. New investments have plummeted to just $5 billion since 2022.

By the numbers:

• Chinese domestic IPOs dropped to $7 billion in late 2023, down from $46 billion in 2022

• Global PE exits declined 26% in first half of 2023

• Zero successful exits by the top 10 PE firms in China this year

Between the lines: Several factors are making China "less investable":

• Beijing's crackdown on offshore listings since 2021

• Slowing Chinese economy

• Increased US scrutiny of Chinese investments

• Regulatory pressure within China

The bottom line: PE investors are caught in a bind - while valuations might be attractive for new investments, the inability to exit existing deals is causing major pension funds and investors to reconsider their China exposure.

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