China M&A Activity Shows Recovery in Late 2025, Driven by EVs, Renewables, and TMT

China's M&A Market Turns a Corner

China's M&A market showed clear signs of recovery in the second half of 2025, reversing several years of decline driven by regulatory crackdowns, geopolitical tensions, and slowing economic growth. Deal volumes increased approximately 20% in H2 2025 compared to H2 2024, marking the first sustained period of growth since the market peaked in 2020-2021.

The recovery, while still nascent and uneven across sectors, has been welcomed by dealmakers and investors who had largely written off China as a viable M&A market in the near term. The improvement reflects a combination of policy recalibration by Chinese authorities, genuine strategic imperatives driving consolidation, and a modest easing of the geopolitical pressures that had frozen cross-border activity.

Domestic Consolidation Drives the Recovery

The recovery has been primarily driven by domestic consolidation, state-directed restructuring, and a modest rebound in cross-border activity. Unlike the pre-2021 period, when foreign capital and technology sector deals dominated headlines, the current recovery is characterized by industrially-focused transactions driven by strategic necessity rather than financial engineering.

Chinese authorities have actively encouraged consolidation in sectors deemed strategically important, viewing M&A as a tool for building national champions, improving industrial efficiency, and reducing overcapacity. This policy direction has provided a supportive framework for transactions that align with national strategic objectives.

Electric Vehicle Sector Consolidation Accelerates

In the electric vehicle sector, consolidation has accelerated dramatically as more than 100 brands compete in an increasingly saturated market. Smaller players, many of which were funded during the initial EV boom of 2018-2022, have been forced to seek mergers, partnerships, or outright sales as capital markets tightened and competition from established players intensified.

The consolidation is widely viewed as both inevitable and necessary. Many of the smaller EV manufacturers lack the scale, technology, and distribution networks required to compete with industry leaders such as BYD, NIO, and XPeng. Transactions have ranged from outright acquisitions to technology licensing agreements, manufacturing partnerships, and asset sales.

The EV consolidation wave is expected to continue through 2026 and beyond, with analysts projecting that the number of viable independent EV brands in China could shrink by more than half over the next several years.

Renewable Energy as a Deal Catalyst

Renewable energy has seen significant M&A activity driven by China's ambitious clean energy targets and the country's dominant position in global renewable energy supply chains. Transactions have spanned solar, wind, battery, and energy storage sectors, with both strategic consolidation and financial investment contributing to deal volumes.

State-owned enterprises were particularly active in renewable energy M&A during H2 2025. Major SOEs, backed by state capital and policy mandates, pursued acquisitions to expand capacity, secure supply chain positions, and consolidate fragmented market segments. These SOE-driven transactions accounted for a meaningful share of total deal value in the sector.

The renewable energy M&A trend is closely linked to China's broader economic strategy, which prioritizes green technology development as both a domestic growth engine and an export opportunity. Companies with leading positions in battery technology, solar panel manufacturing, and energy storage systems have attracted particular interest.

TMT Recovery More Tentative

In the technology, media, and telecommunications sector, the recovery has been more tentative. The regulatory environment has stabilized significantly compared to the 2021-2022 crackdown period, during which major technology companies faced unprecedented scrutiny and punitive actions. However, the scars of that period remain visible in investor behavior.

Foreign investors, in particular, remain cautious about committing capital to Chinese technology assets. Concerns about regulatory predictability, data security requirements, and geopolitical risks continue to weigh on cross-border technology M&A. Domestic transactions in the TMT space have fared somewhat better, particularly in areas such as enterprise software, cloud computing, and artificial intelligence applications.

The gradual normalization of the regulatory environment, combined with genuine strategic imperatives for consolidation in mature technology subsectors, suggests that TMT M&A activity could continue to improve incrementally through 2026.

Improved Sentiment for 2026

Bloomberg reported that the improved mood in China's M&A market is contributing to a broadly confident outlook for Asian dealmaking heading into 2026. While China is unlikely to return to the peak activity levels of 2020-2021 in the near term, the recovery from the trough of 2023-2024 appears to be on firm footing.

Several factors support continued improvement. Policy uncertainty has diminished as authorities have signaled a more predictable regulatory approach. The strategic case for consolidation across multiple industries remains compelling. And China's vast domestic market continues to generate deal opportunities that are, in many cases, insulated from the cross-border complications that have hampered international transactions.

For the broader Asia-Pacific M&A market, China's recovery represents a significant positive development. Even a partial return to historical activity levels would add meaningfully to regional deal volumes and create opportunities for advisors, investors, and corporates positioned to participate.