Chinese PE investment expected to surge

Private equity investment in China is poised to advance in 2014 on the strength of investor expectations for increased deal volume and size, according to a report released in Shanghai on April 10.

Eighty percent of active PE investors in China expect average deal size to grow by up to 25 percent in the coming year, and 70 percent anticipate buyout activity to grow at a similar rate, a report conducted by Bain & Co said.

The report said nearly 80 percent of the investors expect macroeconomic conditions, such as stable but lower GDP growth, to have the greatest impact on PE in the coming year.

The forecasting follows a lackluster 2013, when deal value in China declined 30 percent to $14 billion, even as deal volume increased by 21 percent, according to Bain research.

The positive outlook for 2014 is strengthened in part by strong end-of-year momentum for 2013, Bain's research found.

"What we find for private equity activity in China is significant capacity and desire for investment balanced by a pragmatic 'watch and wait' mindset," said Vinit Bhatia, head of Bain & Co's Private Equity Practice of China's operation.

A majority of investors are seeking a level of return that outpaces even the best performing funds. China, however, remains the top pick in the Asia-Pacific region, and a combination of good macroeconomic trends and more rationalized competition could fuel a significant uptake in activity, Bhatia said.