China's M&A market poised for 2026 expansion as investors regain confidence in assets
Other drivers of continued growth in China's M&A market included companies' push to capture overseas opportunities and recent regulatory easing that made it easier for listed firms to do deals, Yu said. "Sectors representative of Chinese firms' technology innovation likely would be the main engines of China M&A, including automobile components and life sciences," he added.
Both private and state-owned enterprises were pursuing globalisation, eyeing advanced manufacturing targets in Europe and consumer assets in Southeast Asia, Lah said.
Renewable energy and natural resources deals will also remain active. "Chinese companies are likely to continue to look for investments in mining and natural resources to fuel the Chinese economy," said Liang Xu, partner at law firm Hogan Lovells. "If China's relationship with the US [and] EU improves in 2026, we may see more cross-border deals, particularly between China and Europe, in the manufacturing and automotive sector."
Meanwhile, multinational companies (MNCs) would continue rebalancing their Chinese portfolios, selling brands or seeking joint ventures in the consumer and automotive sectors, while others would make strategic investments in pharmaceutical and biotechnology firms, Lah said.
"MNCs are eager to participate in China's technology transformation and innovation, highlighted by the DeepSeek moment," Lah said. "Both Chinese and international private equity firms are increasingly willing to take on mature MNC joint ventures and disposal opportunities to transform and add value to those operations."
In November, Starbucks announced a joint venture with Chinese alternative investment firm Boyu Capital to run its mainland retail operations. Restaurant Brands International also set up a joint venture with CPE to operate Burger King in China.
Challenges in China's M&A market remain. "The pace of M&A will hinge on companies' ability to figure out and execute successful transformation, integration and innovation, in contrast to the past focus on simply buying scale or establishing a network," said Lah. "The level of justification required around value and the return profile is higher."
Sensitive areas such as semiconductors have encountered hurdles. In December, Chinese supercomputer maker Sugon and chip designer Hygon Information Technology called off a planned mega-merger that had been under discussion for months, citing significant changes in the domestic and international market environments.
"M&A deals will continue to gravitate towards less sensitive areas to avoid valuation difficulties associated with potential geopolitical changes," Lah said.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2026 South China Morning Post Publishers Ltd. All rights reserved.
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