China is preparing to launch a national-level mergers and acquisitions (M&A) fund, a move expected to mobilize over 1 trillion yuan ($145 billion) in capital and reshape exit channels for venture investors. The initiative, announced during the annual session of the National People’s Congress, signals a growing policy focus on revitalizing the country's M&A market as a complement to traditional IPO routes.

The fund will be jointly established by the National Development and Reform Commission, the Ministry of Finance, and the People’s Bank of China, according to NDRC chief Zheng Shanjie. Its core objective is to improve liquidity for venture capital, accelerate capital recycling, and channel investment toward innovation-driven industries.

From IPO Reliance to M&A Liquidity

For years, China’s venture ecosystem leaned heavily on initial public offerings as the primary exit route. But tighter listing cycles and a backlog of portfolio companies have shifted attention toward strategic acquisitions and industry consolidation.

Policy signals have been building. In 2024, reforms widely known as the “New Nine Measures” called for deeper restructuring of the M&A market and encouraged listed companies to use acquisitions and equity incentives to strengthen core businesses. The China Securities Regulatory Commission followed with a package of reforms—often referred to as the “Six M&A Measures”—aimed at streamlining deal approvals and improving financing mechanisms for corporate takeovers.

The result has been a visible shift in market activity. Data from the Zero2IPO Research Center shows that Chinese companies participated in roughly 2,800 M&A deals in 2025, with total transaction value exceeding 964 billion yuan, a 60.7 percent surge year-on-year.

Local Governments Build Deal Platforms

Regional governments have already begun constructing their own M&A platforms.

Shanghai’s state-owned assets regulator launched a 500-billion-yuan M&A fund matrix in 2025, targeting strategic industries and supply-chain consolidation, with a goal of generating over 300 billion yuan in deal volume by 2027. Shenzhen has proposed a similar framework aimed at completing more than 200 M&A transactions worth over 100 billion yuan by the same year.

In Beijing, a 30-billion-yuan technology and computing industry M&A fund has been established in Haidian district alongside policies designed to support restructuring among listed companies.

A Market Turning Point

For much of the past decade, M&A investing struggled to gain traction in China. Rapid economic expansion meant entrepreneurs were reluctant to relinquish control, and venture investors focused on growth capital rather than consolidation strategies.

That dynamic is now shifting. Slower growth in some sectors, generational ownership transitions, and government efforts to reduce excess capacity and encourage industrial upgrading are creating a deeper pipeline of acquisition opportunities.

At the same time, the venture capital industry faces mounting pressure to return capital. Many private-equity funds that invested during the high-valuation years of the previous decade are now approaching maturity, while IPO exits remain selective.

This convergence—capital seeking liquidity and companies seeking strategic consolidation—is turning M&A from a niche strategy into a central feature of China’s investment landscape.

Valuation Gaps and the Next Phase

Challenges remain. High valuations from earlier funding cycles often clash with the more conservative pricing models favored by M&A investors, who prioritize cash flow and operational integration. In addition, even when exits occur through acquisitions rather than listings, public-market valuations still act as a benchmark for pricing deals.

Against this backdrop, a national M&A fund could play a catalytic role—providing patient capital, coordinating large transactions, and accelerating the development of a broader ecosystem of professional acquisition funds.

In the view of many industry participants, China’s M&A market may be entering a new phase—one in which consolidation, rather than expansion alone, becomes a defining force in corporate growth and venture capital exits.