Private markets dealmaking is starting to mirror Greater China 's K-shaped economy

China's K-shaped economy, characterized by rapid growth in technology while other sectors lag, is influencing private market dealmaking. Despite weaker consumer spending and slower GDP growth, venture capital (VC) investment in Chinese tech startups surged, with a 200% increase in H1 2026, reaching $52.8 billion. However, private equity (PE) investment in consumer businesses has dropped significantly, to $0.7 billion for the year, down from $10.8 billion in 2025.

VC deal counts edged down by 1.8%, with 3,764 transactions in H1 2026. Yet, PE investment rose by 62.1% to $23.4 billion across 172 deals, with most of that ($0.7 billion) going into growth deals rather than buyouts. The AI sector accounted for half of all VC deal values in 2026, more than double the previous year, with large language models and robotics leading the figures. Notable AI deals included LLM developer Moonshot AI, Shanghai-based startup StepFun, and Kling AI, an AI video-generation platform.

Chinese embodied AI or humanoid startups also saw robust investment, with companies like X Square Robot, GigaAI, and Spirit AI raising capital. Public listings accounted for 96.7% of VC exit value, with the largest being chipmaker ChangXin Memory Technologies, which raised $8.6 billion in Shanghai. Despite this, PE backing for consumer businesses remains low, highlighting the continued disparity between thriving tech startups and struggling sectors in China's market.