According to CNBC, Asia’s top private equity managers are turning bullish on China again after two years of declining investment. At Wednesday’s Global Financial Leaders’ Investment Summit in Hong Kong, EQT Asia chairman Jean Eric Salata declared he’s “actually bullish on China” while Hillhouse Investment founder Zhang Lei predicted China will lead in AI application layers. Private equity deals have collapsed from 562 in 2022 to just 93 through September 2025, with fundraising plunging from $23.6 billion last year to $3.6 billion as of June. The optimism centers on Beijing’s new five-year plan focusing on technological self-sufficiency in areas like quantum computing and AI, with executives pointing to China’s massive engineering talent, 3.7 terawatt power capacity, and rapid commercialization of new technologies.
Why the sudden optimism?
Here’s the thing – this feels like a calculated contrarian bet. Western investors have been fleeing China for years amid geopolitical tensions and economic uncertainty. But these Asia-focused funds are essentially saying “everyone’s wrong.” They’re looking at China’s brutal efficiency in scaling technology – Salata called Xiaomi’s automated EV factory “mind-blowing” with very few people and lots of robots. And they’re betting that China’s combination of massive consumer base, lower costs, and open-source AI models will create winners faster than anywhere else.
The AI revolution play
What really stands out is how much this bullishness hinges on artificial intelligence. Zhang Lei argued China will dominate the AI application layer – basically, turning AI research into actual products people use. Fred Hu of Primavera Capital went even further, saying he’s “very, very confident China will be a leader in the AI revolution.” They’re not just talking about catching up – they’re talking about leading. And that 3.7 terawatt power capacity? That’s more than three times the US capacity. For AI, which gulps electricity like nothing else, that’s not just an advantage – it’s potentially decisive.
The great portfolio rebalancing
There’s a bigger picture shift happening here. Salata mentioned that global investors, who’ve been overwhelmingly invested in dollar assets, are now looking at diversification. After years of pouring money into US tech, they’re realizing they might be overexposed. So we’re seeing the early stages of what could be a major capital rotation back to Asian markets. Mainland China and Hong Kong stand to benefit enormously if this plays out. Basically, when everyone zigs, smart money starts looking for the zag.
But let’s be real about the risks
Now, I’ve got to ask – is this optimism justified or just hope? The numbers don’t lie – private equity activity in China has fallen off a cliff. From 562 deals in 2022 to potentially the worst year in over a decade. Fundraising has collapsed by 85% year-over-year. US-China tensions aren’t going away anytime soon. Still, these aren’t naive investors – they’re some of the savviest money managers in Asia. Their bet seems to be that China’s technological determination, combined with its scale and execution speed, will overcome political headwinds. It’s a high-risk, potentially high-reward play that could either look brilliant or disastrous in a few years.
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