China’s state-backed funding is blocking new investments in US private equity, according to several people familiar with the situation at Donald Trump’s latest salvo in trade war.
State-backed funds have been pulled back from investments in funds from private capital companies at its US headquarters in recent weeks, according to seven private equity executives with knowledge of the issue.
The move came in response to pressure from the Chinese government, three people said.
Some of China’s funds are seeking to be excluded from private equity investments in US companies, even if these investments are made by acquisition groups based elsewhere, some executives added.
The shift in approach to the US is because China is bearing the brunt of US tariffs announced in the last three weeks, threatening to significantly cut trade between the two biggest economies in the world.
Trump has imposed new tariffs of up to 145% on Chinese exports, and Beijing retaliated with a 125% tariff.
Several acquisition executives said Chinese investors changed their approach to US private equity since the trade war began. They will no longer make new funding commitments to US companies, people said.
Some added that they are retreating from the allocation they had planned if they haven’t made a final commitment yet.
China Investment Corporation is one of the funds pulled back by states that are pulling back, according to two people who are familiar with the details. Other Chinese funds have also withdrawn, people said.
Over the past few decades, China’s sovereign wealth funds have poured billions of dollars into many of the largest private capital groups in the United States, including Blackstone, TPG and Carlisle Group.
Industry executives have already seen a slowdown in CIC’s private equity investment in the US in recent years. The Chinese group has set up investment partnerships that deploy cash in countries such as the UK, Saudi Arabia, France, Japan and Italy, as it aims to diversify its portfolio.
Other investors who were major supporters of US private equity, including Canada and Europe’s pension funds, are also rethinking their commitments, the Financial Times reported this month.
Top industry executives told FT that the geopolitical environment, particularly the fallout from Trump’s trade war, is driving a valuation of investment destinations.
“There are definitely questions from global investors and clients about what’s going on here,” said Blackstone’s president Jonathan Gray in Thursday’s revenue call.
Over the past 30 years, Chinese state-backed investors, such as the CIC and the state administration of foreign assets, have helped them pour their money into US private equity funds and drive the sector into the dominant industry that manages 4.7tn from the niche corner of financial services. CIC owned a share in Blackstone, which was sold in 2018.
These Chinese funds are one of the world’s largest investors in alternative assets. In 2023, CIC and SAFE had about a quarter of 1.35 tonnes each, and about a quarter of the 1tn assets invested in the alternative.
Western governments and regulators have taken steps to stop Chinese national funds from direct investments in businesses and infrastructure, so indirect investments through private equity funds have allowed Beijing to deploy hundreds of millions of dollars in Western businesses and economies.
According to people familiar with details and analysis of regulatory applications, US companies backed by Chinese state-backed investors include many of the biggest names in the acquisition industry: Global Infrastructure Partners, Tohma Bravo, Vista Equity Partners, Carlisle and Blackstone, which BlackRock purchased last year.
During President Trump’s first term, the CIC established the private equity “Partnership Fund” with Goldman Sachs, which acquired shares in US and UK companies.
Chinese sovereign wealth funds, particularly CIC, have invested directly in companies along with private equity managers, including Blackstone.
CIC and Vista did not respond to requests for comment. Blackstone, Carlisle, TPG, GIP and Bravo declined to comment.
