Carlyle’s Asia chairman: We’re leaning in to China

The Washington DC-headquartered firm expects to be opportunistic in Chinese private equity over the next six to nine months, Xiang-Dong Yang tells PEI.

As some global firms grow more cautious of investing in China, the Carlyle Group has spied an opportunity to capture assets at more attractive valuations.

Xiang-Dong XD Yang Carlyle Group
Yang: It can be an attractive time to invest

Geopolitical tensions, regulatory uncertainty and ongoing pandemic disruption have led some investors to reallocate capital elsewhere in Asia-Pacific. Fund managers have also become warier, with some expecting China to account for a smaller proportion of their latest or next pan-regional funds.

The resulting investment vacuum could reward those with conviction in China’s ongoing growth. Carlyle is one of those firms, managing director and Asia chairman Xiang-Dong Yang told Private Equity International on the sidelines of SuperReturn Asia in Singapore last week.

“All investors want to see more clarity, whether it’s on covid exit or a little bit more on the regulatory front,” he said. “As a result, what we have seen is that there’s significantly less competition for deals in China and that’s why, for the next six months or nine months, it’s opportunistic. There’s no deal we must do, and at the same time, we’re quite actively leaning in to look at deals.”

Private equity buyers deployed $118.5 billion in China during H1 2022, 34 percent less than in the second half of 2021 and the lowest half-year total since 2019, according to PwC. The 950 deals completed was also the lowest number since H1 2020.

“The history of private equity has been that the more selective the environment, the better the return might be, because there’s less competition and often with lower entry valuations,” Yang said. “So, in that regard, I do think it can be a pretty attractive time to invest. Of course, you have to be careful, choose your targets and be disciplined.”

Carlyle may soon have a new war chest to deploy in Asia-Pacific. The firm could seek at least $8 billion for Carlyle Asia Partners VI, which is expected in market this year, PEI reported in November. Bloomberg later reported in May 2022 that the firm was targeting $8.5 billion. Yang and Carlyle declined to comment on fundraising matters.

Carlyle does not publicly disclose all deals it makes, so it is unclear how many the firm has completed in China over the past few years. Still, recent examples include the acquisition of cosmetics packaging business HCP from Baring Private Equity Asia in May for a reported $1 billion. In 2020, the firm exited its position in online literature business China Literature for a reported $196 million on the Hong Kong Stock Exchange.

“We have exited a significant amount of our investments in China in the last two years, so we actually don’t have as much capital invested there,” Yang noted.

“So, we expect to be opportunistic about investing there. We think China continues to represent one of the biggest markets for PE in Asia due to the scale of the economy; the diversity of the industries; the large entrepreneurial class who are increasingly young, sophisticated, highly educated; and the ever-expanding management talent pool.”

Yang identified climate-related assets as one likely focus of Carlyle’s attention in China, and Asia-Pacific more broadly. “We’re spending more time looking at that,” he said. “The Chinese government has a very strong commitment to climate and we have been actually looking at that sector. Korea is another place where some of the companies have globally leading climate technologies, so we are also looking there.”


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