**Global:** Chinese sovereign wealth funds, including the China Investment Corporation, are significantly cutting back investments in US private equity amid escalating US-China political tensions and trade disputes, redirecting capital towards Europe, the Middle East, and Asia while facing regulatory barriers and resource export restrictions.
Chinese State-Backed Funds Pull Back from US Private Equity Investments Amid Rising Political Tensions
Chinese sovereign wealth funds are significantly reducing their investments in US private equity markets as political tensions between Washington and Beijing intensify. This strategic retreat comes amid escalating trade disputes that have seen both countries impose tariffs exceeding 120% on each other’s goods, according to reports from executives and sources familiar with the matter.
Multiple senior executives from leading private equity firms have confirmed that Chinese state-backed funds are not only halting new allocations to US-based private capital groups but are also actively seeking to avoid deals involving American assets—even when such investments are made through global buyout firms headquartered outside the United States. Among the state-backed investors scaling back is the China Investment Corporation (CIC), one of China’s largest sovereign wealth funds. Two individuals with direct knowledge, speaking to the Financial Times, revealed CIC’s withdrawal from US private equity, alongside similar moves by other Chinese funds.
Data indicates that CIC began reducing its exposure to US private equity as early as 2023. While previously maintaining active positions in American markets, the fund is now redirecting capital towards regions including Europe, the Middle East, and Asia. CIC has forged new partnerships in countries such as the United Kingdom, France, Saudi Arabia, Japan, and Italy as part of a broader effort to diversify its global investment portfolio.
Chinese sovereign wealth funds have historically been among the most significant backers of US private capital firms like Blackstone, TPG, and the Carlyle Group. Their involvement has been instrumental in the expansion of the private equity sector, which currently manages close to $4.7 trillion in assets worldwide. Consultancy Global SWF notes that as of 2023, the China Investment Corporation and the State Administration of Foreign Exchange controlled approximately 25% of their assets in alternative investments, totaling $1.35 trillion and $1 trillion, respectively.
Despite this considerable capital flow, Chinese investors have expressed dissatisfaction with what they view as unfavourable treatment by Western regulators. They have criticised foreign governments for imposing barriers under the pretext of national security, which in effect block Chinese capital from entering critical sectors such as technology and infrastructure. While direct investments in American companies face increasing scrutiny, private equity structures had remained a relatively accessible channel for Chinese investors to participate in the US market without immediate regulatory impediments.
However, the current geopolitical climate is prompting broader reassessment beyond China. Pension funds from Canada and Europe, traditionally robust supporters of US private equity, are also reconsidering their exposure. Blackstone President Jonathan Gray, speaking during a recent earnings call, acknowledged the uneasy environment: “There definitely are questions from global investors and clients about what’s happening here,” he said, referring to the “tariff-ridden” political climate that complicates cross-border investments.
Simultaneously, China has tightened control over exports of several strategic minerals vital to advanced technologies. Export restrictions have been placed on antimony, germanium, and gallium—metals essential for defence applications, semiconductor manufacturing, and renewable energy systems. China, the world’s leading producer of these metals, has progressively added them to its list of controlled substances since 2023. Reuters reports that in December, Beijing officially prohibited exports of these materials to the US, anticipating restrictive trade laws under the administration of President Donald Trump.
Statistical data from the first quarter reveals significant declines in exports of antimony and germanium to the US, dropping 57% and 39% respectively compared to the previous year. Although gallium exports saw some quarterly increase over 2023, shipments in March fell to their lowest level since the previous October. These measures demonstrate China’s increasingly assertive stance in leveraging its control over scarce resources amid ongoing trade and political frictions.
The evolving dynamic between Chinese state-backed investors and US private equity markets underscores the complexities of international investment flows amid escalating geopolitical competition. The shifts in capital allocation reflect broader strategic recalibrations as both nations navigate a landscape marked by economic nationalism and regulatory scrutiny.
Source: Noah Wire Services
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