Alibaba, which has pledged to invest more than 380 billion yuan ($53 billion) on AI infrastructure such as data centers over the next three years, has been very active, including selling its majority stake in hypermarket chain Sun Art Retail Group Ltd. and department store business Intime Retail Group Co. It also formed a $4 billion JV with E-Mart Inc.’s e-commerce platform in South Korea.

The uptick has come with the blessing of Beijing, eager to reduce any reliance on US technology. President Xi Jinping has met with prominent entrepreneurs to stress his support for them and the private sector. In September, a fresh batch of policies was introduced, emphasizing themes such as business upgrades and innovation, and allowing listed companies to conduct more cross-sector deals.

With assets increasingly up for grabs, Chinese tech firms often tend to prefer to participate in a consortium instead of being the lead buyer, according to Ellis Chu, head of Asia M&A at Jefferies Financial Group Inc.

New Force Awakens

Not long ago, China was warning about “irregular expansion of capital” and monopolies. Amid the fallout, Tencent scrapped a plan in 2022 to acquire handset gaming brand Black Shark. Among other deals to collapse was a planned merger between DouYu International Holdings Ltd. (DOYU) with Huya Inc., which was rejected by regulators in 2021 on the grounds it would strengthen the game streaming dominance of Tencent, a shareholder in both companies.

Since then, AI has emerged as a major force, boosted by the success of Hangzhou-based DeepSeek, which sparked a rally in Chinese tech stocks this year. A group of startups known as AI Dragons or Tigers has bolstered China’s AI credentials and attracted investment from both Alibaba and Tencent. Some are also considering moves such as initial public offerings.

“Market sentiment has changed in a positive way after a surge in AI interest earlier this year,” Chu at UBS said. “Investor enthusiasm for China tech has come back, and that’s led to more capital markets deals such as A+H listings, follow-on offerings and convertible bonds as companies seek to beef up their balance sheets. This strong appetite is poised to continue.”

Other deals include TikTok’s owner ByteDance Ltd. acquiring Shenzhen-based earphone maker Oladance, bringing on board a team of seasoned former Bose Corp. engineers. ByteDance has also delved into areas like robotics and edtech gadgets through in-house development or investments.

“We’re likely to see more in-market consolidation in China,” Chu said. “After years of being a growth market, now China is more mature for tech companies and, to a certain extent, similar to operations in the West.”

—With assistance from Zheping Huang.

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