Key Takeaways
- • China's PE secondary market recorded 731 yuan-denominated trades totaling 77.3 billion yuan ($11 billion) in H1 2025, representing an 89% year-over-year increase and marking a record transaction level for the market.
- • Canada's second-largest pension manager CDPQ is preparing to sell approximately $2 billion in China-based PE assets via secondary transactions after halting new PE investments in China two years ago, reflecting broader pressure on investors to achieve liquidity.
- • CDH Investments, a China-focused buyout firm, is raising a multi-asset continuation vehicle to allow existing portfolio investors to exit positions, providing an alternative exit pathway as traditional trade sales and public listings face headwinds.
- • Steep valuation discounts are attracting long-term buyers who maintain conviction in China's long-term growth trajectory, despite economic and geopolitical challenges that have constrained traditional exit routes for PE funds.
- • The secondary market surge reflects acute pressure on selling funds to repay investors while facing constrained access to trade buyers and capital markets exits, positioning secondaries as a critical liquidity mechanism for China-focused PE portfolios.
Summary
China's private equity secondary market is experiencing accelerated momentum as fund managers and institutional investors deploy secondary transactions to achieve liquidity in a constrained exit environment. H1 2025 data from ZERONE, a market data provider, shows 731 secondary trades involving yuan-denominated PE funds, generating 77.3 billion yuan ($11 billion) in transaction volume—a record high representing an 89% year-over-year increase. This surge underscores the market's critical role in addressing investor redemption pressures and portfolio rebalancing needs amid broader macroeconomic headwinds.
Two major transactions characterize the current wave of secondary activity. CDPQ, Canada's second-largest pension manager and historically a significant China allocator, is evaluating the sale of approximately $2 billion in China-based PE assets through secondary channels. This move follows the fund's decision to halt new PE investments in China two years ago, indicating a strategic pivot toward liquidating existing holdings. Concurrently, CDH Investments, a prominent China-focused buyout platform, is structuring a multi-asset continuation vehicle—an increasingly common PE strategy that allows portfolio companies to be transferred into new vehicles, enabling existing limited partners to choose between maintaining exposure or cashing out at predetermined terms.
The drivers of secondary market activity are rooted in structural challenges facing China-focused PE investors. Selling funds face mounting pressure to repay capital to limited partners while confronting constrained traditional exit pathways: trade buyer appetite has weakened, and capital markets remain selective regarding IPO listings due to ongoing economic uncertainty and geopolitical considerations. Secondary market participants, including long-term focused buyers such as LGT, are capitalizing on steep valuation discounts offered by distressed or time-pressured sellers. These buyers are maintaining strategic conviction in China's secular growth potential, allowing them to deploy capital opportunistically despite near-term headwinds.
The continuation fund structure and secondary market expansion have become essential mechanisms for resolving the liquidity mismatch between investor return timelines and constrained exit opportunities. While these instruments provide near-term relief for capital deployment and LP liquidity, they also reflect deeper structural tensions in China's PE ecosystem—suggesting that fundamental recovery in traditional exit channels (IPO activity and strategic acquisitions) remains uncertain. The record H1 2025 transaction volume signals that secondary market growth may continue as PE funds manage portfolio maturities and investor redemptions in an environment where conventional exits remain challenged.
Two major transactions characterize the current wave of secondary activity. CDPQ, Canada's second-largest pension manager and historically a significant China allocator, is evaluating the sale of approximately $2 billion in China-based PE assets through secondary channels. This move follows the fund's decision to halt new PE investments in China two years ago, indicating a strategic pivot toward liquidating existing holdings. Concurrently, CDH Investments, a prominent China-focused buyout platform, is structuring a multi-asset continuation vehicle—an increasingly common PE strategy that allows portfolio companies to be transferred into new vehicles, enabling existing limited partners to choose between maintaining exposure or cashing out at predetermined terms.
The drivers of secondary market activity are rooted in structural challenges facing China-focused PE investors. Selling funds face mounting pressure to repay capital to limited partners while confronting constrained traditional exit pathways: trade buyer appetite has weakened, and capital markets remain selective regarding IPO listings due to ongoing economic uncertainty and geopolitical considerations. Secondary market participants, including long-term focused buyers such as LGT, are capitalizing on steep valuation discounts offered by distressed or time-pressured sellers. These buyers are maintaining strategic conviction in China's secular growth potential, allowing them to deploy capital opportunistically despite near-term headwinds.
The continuation fund structure and secondary market expansion have become essential mechanisms for resolving the liquidity mismatch between investor return timelines and constrained exit opportunities. While these instruments provide near-term relief for capital deployment and LP liquidity, they also reflect deeper structural tensions in China's PE ecosystem—suggesting that fundamental recovery in traditional exit channels (IPO activity and strategic acquisitions) remains uncertain. The record H1 2025 transaction volume signals that secondary market growth may continue as PE funds manage portfolio maturities and investor redemptions in an environment where conventional exits remain challenged.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.