A Brutal Global Fundraising Environment
Global private equity fundraising fell 17% year-on-year in 2025, and the Asia-Pacific region was hit even harder, with fundraising roughly halved, according to McKinsey's Global Private Markets Report published in early 2026. China — despite being the world's second-largest PE/VC market — is navigating this downturn with increasing selectivity rather than volume.
The Numbers
- Global PE fundraising: down 17% YoY in 2025
- Asia-Pacific: roughly 50% decline vs 2024
- China PE/VC market: more resilient but highly targeted
- Winning categories: government guidance funds, AI, semiconductors, green technology
China's Distinct Position
China's PE/VC ecosystem is insulated from the global fundraising crunch in one key way: government guidance funds (国家引导基金) at central and provincial levels continue to deploy capital into strategic sectors. These funds — backed by state capital — have effectively created a parallel PE market focused on AI compute, semiconductor equipment, biotech and new energy. In 2025, over 1,680 companies held more than 1 trillion yuan in investment properties, a sign that institutional capital is actively recycling real estate assets into alternative investments.
The Alpha Challenge
McKinsey's report frame — that alpha is made, not found — resonates especially in China, where macro tailwinds that generated easy returns (high GDP growth, cheap leverage, property appreciation) have faded. PE managers are pivoting to operational value creation: working with portfolio companies on digital transformation, cost efficiency and export market expansion rather than financial engineering.
Implications for Capital Markets
The fundraising squeeze is reducing the supply of growth capital available to mid-stage private companies — precisely the firms that would otherwise IPO. With A-share IPO approvals still constrained, this creates a bottleneck that may delay the market debut of some high-quality businesses, keeping them in private markets longer.