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AsianFin -- After years of regulatory crackdowns that erased billions in market value and sidelined prominent founders, China’s leading tech firms are staging a comeback — this time with the government’s tacit support.
Companies like Alibaba Group Holding Ltd. and Tencent Holdings Ltd., once curtailed over antitrust concerns, are now actively pursuing acquisitions at home and abroad as Beijing shifts its focus toward building global champions in strategic sectors like artificial intelligence and advanced technologies.
With economic momentum faltering and geopolitical tensions persisting, Chinese authorities are adopting a more pragmatic stance, particularly in sectors deemed vital to national competitiveness.
“There’s a return to regulatory normalization in China’s tech space,” said Allan Chu, co-head of Asia Pacific TMT investment banking at UBS. “That’s giving companies and investors the confidence to reengage in dealmaking, especially in AI and robotics.”
Strategic Deals Resurface
Tencent has recently ramped up its acquisition activity, including a deal earlier this month by its music unit to acquire podcast platform Ximalaya Inc., aiming to strengthen its position as China’s answer to Spotify. That followed a rare cross-border move — a nearly 10% stake in South Korea’s SM Entertainment. Last year, it also took control of Kuro Games, the Guangzhou-based studio behind the hit gacha game Wuthering Waves, and is reportedly eyeing a potential bid for Korean game developer Nexon.
Meanwhile, Alibaba-linked Ant Group, once at the center of regulatory scrutiny, acquired a controlling stake in Bright Smart Securities this April — triggering a near 100% rally in the stock. It marked a symbolic return to public dealmaking for a firm associated with Alibaba founder Jack Ma, who faded from the spotlight after criticizing regulators in 2020.
Chinese tech firms aren’t just buying — they’re also restructuring. Alibaba is shedding traditional retail assets, including its controlling stake in Sun Art Retail Group and department store chain Intime Retail.
At the same time, it’s ramping up its commitment to AI, pledging to invest over 380 billion yuan ($53 billion) in infrastructure such as data centers over the next three years. The company also inked a $4 billion joint venture with South Korea’s E-Mart to expand its regional e-commerce footprint.
“Chinese tech companies are aggressively exploring M&A opportunities both domestically and overseas as they search for growth beyond their core businesses,” said Ho-Yin Lee, head of Asia Pacific TMT investment banking at Citigroup.
The deal resurgence is backed by a clear policy pivot. Chinese President Xi Jinping has recently met with leading entrepreneurs, signaling support for the private sector. New rules introduced in late 2023 encourage innovation-driven business upgrades and allow public firms to pursue more cross-sector transactions — a notable reversal from the earlier emphasis on curbing “disorderly capital expansion.”
However, dealmakers remain cautious. According to Jefferies’ Asia M&A head Ellis Chu, Chinese tech firms often prefer joining investment consortia rather than leading bids outright, especially in sensitive or strategic industries.
The rise of generative AI has also reignited investor interest. The success of startups like Hangzhou’s DeepSeek and a wave of AI “Dragon” and “Tiger” companies backed by Alibaba and Tencent have boosted tech stock valuations and fueled capital market activity. Several are now eyeing IPOs, while others are using the momentum to raise funds via secondary listings or convertible bond offerings.
“AI enthusiasm has lifted sentiment across China’s tech sector,” said Chu. “We’re seeing renewed appetite for equity deals and balance sheet expansions — and that trend looks set to continue.”
ByteDance, owner of TikTok, has also been active, recently acquiring Shenzhen-based earbud maker Oladance and expanding into robotics and educational tech through a mix of investments and internal innovation.
“In-market consolidation is accelerating,” Chu added. “China’s tech sector is evolving from rapid growth to a more mature, Western-style market — and M&A will be a key part of that transformation.”
