Zhang Yichen, chairman and CEO of Citic Capital Holdings, one of China's leading capital market players, has argued that buyout funds and mergers and acquisitions, rather than initial public offerings, will define the country's next capital market cycle[reference:0][reference:1].
In an interview conducted during the "two sessions" – the annual meetings of China's top legislature and advisory body – the veteran investor and government adviser discussed the evolving role of buyout funds, the impact of geopolitical tensions on cross-border deals, and why global brands are increasingly relying on local partners to succeed in China[reference:2].
Zhang, who also chairs Trustar Capital and sits on the board of the Hong Kong Exchanges and Clearing as an independent non-executive director[reference:3][reference:4], emphasized that patient capital is not simply about holding assets for longer. "It requires both long-term capital and the capability to create value within companies," he said[reference:5]. He noted that China has historically lacked long-duration capital due to its reliance on bank-led, indirect financing[reference:6].
The comments come as regulators have stressed that government-backed investment funds should lead the way in serving as "patient capital" – funding provided from a more long-term perspective with a higher tolerance for risk – as a contrast to the pursuit of rapid and maximum returns[reference:7]. Zhang argued that increasing the share of direct and equity financing is essential to building a foundation for patient capital[reference:8].
At the same time, he stressed that institutions managing this capital must be able to empower businesses through governance improvements, operational support and strategic guidance[reference:9]. The interview, which first appeared in SCMP Plus, also explored Hong Kong's strategic role as a global financial centre[reference:10][reference:11].
The push for buyout-led exits comes as China's private equity industry faces a mounting exit bottleneck. Zhang has previously noted that the country's primary market has accumulated at least 10 trillion yuan ($1.4 trillion) in investment assets, including numerous high-quality companies and "hidden champions" in various sectors[reference:12]. "If exit channels are blocked, capital will form a 'dammed lake,' affecting the entire industry's virtuous cycle," he warned[reference:13].
In his view, while IPOs remain an important exit route, they are far from the only one. In mature markets, only 20% to 30% of primary market investment exits are completed through IPOs; the majority are achieved through M&A[reference:14][reference:15]. "M&A restructuring should therefore become a key area of focus for China's capital market in the future," Zhang said[reference:16].
The government has signaled strong support for this shift. The 2026 Government Work Report proposed expanding exit channels for private equity and venture capital funds and increasing the proportion of direct and equity financing[reference:17]. In March, the National Development and Reform Commission announced plans to establish a national M&A fund in collaboration with the Ministry of Finance and the People's Bank of China, expected to guide and leverage over 1 trillion yuan ($140 billion) in various types of capital[reference:18].
Zhang pointed to the "M&A Six Measures" as a positive development that has already boosted M&A activity in the A-share market[reference:19][reference:20]. However, he noted that institutional constraints remain, including performance earnout requirements that can hinder industry integration[reference:21]. "Many industries in China are too fragmented and need to be consolidated through M&A to form leading companies," he said[reference:22].
Looking ahead, Zhang believes the venture capital industry will increasingly shift toward early-stage, small-scale and hard-tech investments[reference:23]. At Citic Capital, the firm's VC and growth-stage funds focus on frontier technology areas such as artificial intelligence[reference:24]. The combination of a national M&A fund, regulatory reforms and a maturing buyout ecosystem could fundamentally alter China's capital market dynamics, reducing the historical over-reliance on IPOs and creating a more diversified exit landscape for investors.
