To colleagues: Asia's private equity industry is expected to regain momentum by 2025, with China's hot AI sector attracting the attention of investors.

The latest publication from the Hong Kong branch of PwC, "Asian Private Equity Investment Perspectives 2025," points out that with market activities rebounding in 2024, the Asian private equity industry has shown a resurgence of optimism. Damon Tang, managing partner of PwC Hong Kong Consulting, stated that merger and acquisition activities in Asia regained momentum in 2024, signaling the end of a two-year decline in private equity transaction volume. This recovery was mainly driven by the surge in transactions in the Asia-Pacific region, particularly in Southeast Asia, where countries recorded strong growth in gross domestic product. In addition, the "China+1" strategy advocating for supply chain and investment diversification beyond China has brought significant growth momentum to the Asia-Pacific region, further driving transaction activities and injecting new vitality into the private equity sector. Tang added that despite ongoing global geopolitical uncertainties, the private equity market in the Asia-Pacific region is still optimistic for 2025, mainly benefiting from strong transaction activities in Southeast Asia and the technology, media, and telecommunications industries. Strong consumer demand and continued digital transformation further drive growth in the region. Looking ahead to 2025, this positive momentum is expected to continue, supported by multiple opportunities such as the success of Chinese AI startups like DeepSeek, the thriving e-commerce market in Southeast Asia, and the growing consumption power in India. Additionally, lower interest rates reduce borrowing costs, which are expected to further promote investment activities and support the market's upward trend. China's AI sector, with its breakthrough technological advancements and vibrant startup ecosystem, has successfully attracted high attention from global private equity investors. Represented by companies like DeepSeek, China has showcased its competitive strength on the global stage and has introduced cutting-edge AI solutions in various industries such as healthcare, fintech, autonomous driving, and smart manufacturing. Wei Fang, Managing Director of PwC Hong Kong Consulting, stated that the strong support from the Chinese government for AI development, coupled with abundant domestic data resources and a user base highly receptive to technological innovation, has laid a solid foundation for the rapid growth of the AI industry. The rapid adoption of generative AI applications and the deep integration of AI technology into traditional industries have further sparked investors' interest. Against the backdrop of global private equity firms actively seeking high-growth opportunities, China's AI industry, with its strategic advantages and immense value-added potential, has become a focus of significant investment interest. The IPO market in Hong Kong witnessed significant rebound in 2024 and reestablished itself as one of the top four major listing venues globally. Driven by the growth of the Chinese economy, the market valuation of newly listed companies improved, coupled with a streamlined IPO process, enhancing Hong Kong's attractiveness as a gateway to mainland China and Southeast Asia. With further lowering of the threshold for tech company listings and continuous optimization of the regulatory environment, Hong Kong's IPO market is expected to further grow in 2025. Tang mentioned that battery giant Contemporary Amperex Technology (300750.SZ) plans to list in Hong Kong, with an expected fund-raising size of $5 billion, making it potentially the largest IPO on the Hong Kong Stock Exchange in 2025, showcasing the renewed allure of the Hong Kong market. However, amidst the current complex global competitive landscape, Hong Kong needs to further enhance its market mechanisms, strengthen capital market vitality, and promote financial model innovation to address evolving external challenges and enhance international competitiveness.