Why is China’s M&A activity surging? Deal values jump 78.5% in Q4

China’s mergers and acquisitions (M&A) market is showing signs of a strong comeback after years of decline, driven by government stimulus efforts and the looming impact of U.S. tariffs under President Donald Trump.

After a sluggish performance for most of 2024, China’s M&A activity saw a sharp uptick in the final quarter, with deal values surging 78.5% to $129 billion from $72 billion in the previous quarter, according to Dealogic data.

This unexpected rebound is fueling expectations that deal-making momentum will continue into 2025.

China adapting to new tariff pressures

China’s M&A activity has been on a downward trend since 2020, with total deal value in 2024 nearly 45% lower than the $553 billion recorded four years prior.

However, companies are now moving to consolidate and restructure in response to shifting economic conditions—including fresh tariff measures from Washington.

Trump implemented new 10% tariffs on Chinese goods starting Feb. 4, adding to existing tariffs of up to 25% imposed during his first term.

As a result, Chinese businesses are prioritizing supply chain diversification and strengthening their financial footing through strategic mergers and acquisitions.

The pressure is particularly acute for China’s small and micro enterprises (MSEs), which saw their average revenue drop 4.8% year-on-year in the third quarter of 2024, according to Peking University’s Centre for Enterprise Research.

To cope with rising costs, many MSEs have scaled back hiring and reduced operations.

Chinese regulatory shifts fuel deal-making

The resurgence in M&A activity is also being supported by regulatory reforms aimed at easing deal approvals.

Last September, the China Securities Regulatory Commission streamlined its approval process, reducing review times and allowing companies to raise capital for acquisitions in phases.

These changes have removed long-standing barriers, including extensive information disclosure requirements related to antitrust and data security concerns.

At the same time, major Chinese corporations are accumulating significant cash reserves, with listed firms distributing a record 2.4 trillion yuan in dividends last year.

Goldman Sachs projects that cash distributions could reach 3.5 trillion yuan in 2025.

This financial strength is expected to drive more acquisitions, particularly among tech giants like Pinduoduo, which have the capital to pursue aggressive growth strategies through M&A.

With both regulatory and financial conditions becoming more favorable, industry analysts expect China’s deal-making resurgence to continue in the coming months, providing a critical buffer against economic headwinds and external trade pressures.

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