International consumer and industrial groups are increasingly exploring partnerships with private equity investors to reshape or partially exit their China operations, according to a report by the Financial Times.
The reports cites unnamed sources familiar with the situation as revealing that amid intensifying domestic competition, slower economic growth and geopolitical uncertainty weigh on prospects in the world’s second-largest economy, the owners of brands including Decathlon, Häagen-Dazs, Peet’s Coffee, Costa Coffee, Lawson and GE HealthCare, are reviewing options for their China operations, ranging from minority stake sales to full carve-outs.
In many cases, groups are seeking local private capital partners to provide operational expertise and faster decision-making in a market that has become significantly more challenging for foreign players.
The reassessment reflects a combination of factors, including volatile US-China relations, weaker consumer sentiment and the rise of highly competitive domestic rivals that are often better adapted to local tastes and pricing dynamics. Foreign companies have also faced pressure from increasingly value-conscious consumers, particularly in lower-tier cities affected by China’s prolonged property downturn.
Private equity executives say interest in local partnerships has revived after a period in which some multinational boards considered exiting China altogether. While geopolitical tensions peaked in 2023, many global companies ultimately chose to remain, citing the opportunity cost of leaving such a large market. Today, however, sentiment has become more cautious, prompting renewed efforts to bring in on-the-ground partners.
According to a September survey by the American Chamber of Commerce in Shanghai, only 41 per cent of respondents were optimistic about their China business outlook, a record low. Members identified US-China tensions and heightened domestic competition as the main challenges.
The pressure is particularly acute in consumer sectors. Domestic challengers have rapidly gained scale, with Luckin Coffee now operating far more outlets in China than Starbucks, Peet’s and Costa combined, while local convenience store chains dwarf their Japanese counterparts.
Against this backdrop, several high-profile transactions have underscored private equity’s growing role in reshaping foreign-owned China businesses. Starbucks recently agreed to sell a 60 per cent stake in its China operations to Hong Kong-based Boyu Capital in a deal valuing the business at $4bn. The transaction is expected to support an expansion of the brand’s store network from around 8,000 locations to more than 20,000.
Similarly, the owner of Burger King has partnered with Beijing-based CPE to help drive growth in China, while General Mills-owned Häagen-Dazs has been exploring options for its roughly 400 ice cream stores in the country. Decathlon has also tested investor appetite for a minority stake sale, while GE HealthCare’s China operations, which generated $2.4bn in revenue last year, are viewed as a potential large-scale carve-out.
Market participants often point to Carlyle’s investment in McDonald’s China as a blueprint for how private equity can unlock value through localisation. Carlyle acquired a minority stake alongside Citic Group and Trustar Capital in 2017 and exited in 2024 after significantly expanding the chain’s footprint, accelerating digital adoption and tailoring menus to local preferences.
