Chinese state-backed funds are pulling back from investing in U.S. private equity funds, the Financial Times reported, citing people in the sector, in another escalation in the trade war between Washington and Beijing.
According to a report in the Financial Times on Monday, Chinese entities are pulling back from investing in American private equity funds. The information was confirmed by seven industry executives. Three of them said the reason for the steps was pressure from Chinese authorities.
Some Chinese funds have also taken steps to be barred from investing in American companies by non-U.S. private equity funds they back, the Financial Times reported.
Several of the medium's interlocutors linked the Chinese actions to the trade war initiated by Donald Trump, the latest instalment of which was the increase in US tariffs on Chinese exports to 145%, which was met with a response from Beijing, which imposed tariffs of 125% on US products.
The crackdown on Chinese investment was expected to hit U.S. private equity groups like Blackstone, TPG and Carlyle Group, which have received billions of dollars from Chinese state-backed entities over the past few decades, helping to transform a niche industry into one valued at $4.7 trillion.
Among the Chinese state-backed funds that are pulling back from investing in the U.S. is China Investment Corporation (CIC), which began reducing its ties to the United States years ago, during Donald Trump’s first term, when it sold its stake in Blackstone in 2018.
In parallel to scaling back its U.S. presence, China Investment Corporation (CIC) has in recent years formed investment partnerships through which it is investing cash in countries such as the U.K., Saudi Arabia, France, Japan and Italy, diversifying its portfolio.
The Financial Times has drawn attention to the fact that Western governments and regulators have tried to prevent Chinese state funds from investing directly in companies and infrastructure. Yet capital from the Middle Kingdom has flowed there through a back door, through private equity funds, allowing Beijing to invest hundreds of billions of dollars in Western companies, including those of strategic importance.
The recent restrictions on investments in the US do not apply only to entities from China. The lack of stability and predictability in US policy has caused some of the world's largest pension funds (including those from Canada and Denmark) to suspend or reassess investments in the US private equity market.
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