Asia-Pacific

PE investment in China fell through the floor in Q2’25, dropping from an already suppressed $4.9 billion in Q1’25 to just $700 million across 20 deals in Q2’25; both the volume of PE investment and the number of PE deals were lower than any results seen during the last 10 years. The rapidly evolving tariff war between the US and China likely drove significant caution among PE investors. It is expected that most PE investors will sit on the fence until the trade uncertainties are resolved.

Japan saw mixed results this quarter, with total investment dropping from $16.8 billion across 62 deals in Q1 to just $3.6 billion across 66 deals in Q2. The largest deal was Hulic Co’s announced plans to acquire the remaining stake in Koken Boring Machine from Hitachi Construction Machinery for $446.9 million

On the flip side, Australia saw strong PE investment - almost doubling between Q1’25 and Q2’25, from $5.6 billion across 81 deals to $11.2 billion across 71 deals. Two billion+ deals helped drive this surge — the $2.5 billion sale of Australia-based Aveo Group by Brookfield to a consortium of acquirers and the $1.8 billion acquisition of Macquarie Asset Management’s US and Europe-based investment businesses by Japan-based Nomura.¹

Private equity investment in Asia this year revealed sharp sector-level contrasts. Industrial manufacturing was consistent, attracting $12.2 billion in PE investment by the end of Q2’25 — already on pace to match the $24.5 billion seen during all of last year. Energy and natural resources also experienced relative consistency, attracting $6.9 billion by midyear, compared to $15.4 billion in all of 2024. Healthcare proved to be another bright spot — accounting for three of Asia’s top 10 deals during Q2’25, including the $2.5 billion secondary buyout of Aveo Group and notable deals for South Korea-based Viol ($379.6 million) and Australia-based Health Metrics ($400 million).

In contrast, the consumer and retail sector struggled significantly during the first half of the year, pulling in only $4.5 billion — on pace for the slowest year on record. TMT, a historical heavyweight, also saw investment slow dramatically, with just $11.1 billion during the first half of 2025, compared to $44.5 billion in all of 2024. The wide divergence in sector performance highlights the highly selective investment environment in Asia, shaped by both global macro conditions and shifting regional priorities.

The announcement of tariffs by the US and the trade war with China dampened PE investment activity in Asia during the quarter, although several large deals kept PE investment very robust. The challenge for PE investors in the region at the moment is not the tariffs themselves, so much as the continued uncertainty as to what the end landscape will look like. This halted dealmaking on a number of fronts during Q2’25 as the uncertainty made it difficult to price deals appropriately — particularly those focused on companies producing goods for export. Once there is some clarity as to tariff policies and structures and PE funds have had a chance to incorporate the new information into their deal evaluation and due diligence processes, deal activity will likely begin to pick up again.

The general sentiment within the PE market in Asia is that any final US tariffs applied will likely be more challenging for China than for many other jurisdictions in the region. This is causing some PE investors to start taking a second look at opportunities in jurisdictions expected to be less affected by tariff levels because of a belief that the US will not be able to reshore all manufacturing activities given the significant difference in labor and operating costs. In particular, the implementation of tariffs could be beneficial to jurisdictions in Southeast Asia — such as Malaysia, the Philippines, Indonesia, Thailand and Vietnam — as they may be able to attract new waves of investment based on having lower costs of labor and lower tariff rates than China. This is causing some optimism in some jurisdictions within Asia — although it could, if realized, come at the expense of others.