China's SWFs start withdraw funds from American private equity firms
JAKARTA – Investment funds backed by the Chinese government are being withdrawn from private equity firms in the United States.
This move comes in response to rising political tensions between Washington and Beijing, including mutual trade tariffs exceeding 120% on imported goods.
China’s Sovereign Wealth Fund (SWF) is now reluctant to allocate capital to US-based private equity groups. Some investors have even requested to exit transactions involving American assets, even if the deals are conducted via global investment firms outside the US.
As reported by Financial Times, China Investment Corporation (CIC)—one of China’s largest sovereign wealth funds—has been reducing its exposure to US private equity since early 2023. CIC is now shifting its focus to markets in Europe, the Middle East, and Asia, forging partnerships with countries such as the UK, France, Saudi Arabia, and Japan to diversify its portfolio.
Historically, China’s SWFs have been major backers of US private equity firms, including Blackstone, TPG, and Carlyle Group, which collectively manage around $4.7 trillion globally.
According to Global SWF data, as of 2023, CIC and SAFE (State Administration for Foreign Exchange) had allocated 25% of their total assets to alternative investments, amounting to $1.35 trillion and $1 trillion, respectively.
Chinese investors cite Western regulatory policies as the primary barrier to their investments, arguing that they have been unfairly treated under national security concerns, particularly in strategic sectors such as technology and infrastructure.
While indirect investment routes through private equity were once a viable option, escalating political tensions have made this model increasingly difficult. Even pension funds from Canada and Europe are reportedly reassessing their investments in US private equity.
Jonathan Gray, President of Blackstone, confirmed in an earnings call last week that global clients feel uneasy about the situation. “Many investors are questioning what is really happening here,” Gray stated.
Beyond withdrawing investments, China has also tightened its export restrictions on key strategic minerals, including antimony, germanium, and gallium, which are vital to technology, defense, and renewable energy industries.
Since December 2023, Beijing has banned exports of these materials to the US, leading to a sharp decline in global supply. Antimony and germanium exports dropped by 57% and 39%, respectively, in the first quarter of 2024 compared to the previous year. (DK/LM)