Multinational corporations (MNCs) are reshaping their China exposure through more flexible carve-out structures amid intensifying local competition, slower growth, and ongoing geopolitical risk, according to several China-focused dealmakers.

Once concentrated in structurally challenged legacy sectors, China carve-outs are now broadening across industries, reflecting a wider reassessment of China exposure among MNCs, they said. The old playbook for MNCs in China’s brutally competitive market no longer works, although China growth narratives remain attractive to global players relative to other regions.

This year, MNCs’ carve-out deals have contributed a significant portion of China’s M&A landscape. Year-to-date, Chinese carve-out deal volume increased 169% to USD 3bn from USD 1.1bn in the same period of 2025, marking the highest YTD total since 2018, according to Mergermarket database. The deal count is up 40% to 14 deals YTD compared to 10 deals in the prior year period.

Rightsizing China exposure is taking multiple forms, including stake reductions, selective asset sales including factories, JVs with Chinese partners, and other localised ownership structure. Recent carve-outs have seen MNCs stepping back, forming strategic alliances, and empowering Chinese management to lead local operations.

This portfolio restructuring is helping global players to simplify operating models and recycle capital back into their own core businesses. Meanwhile they can still leverage China’s dynamism, low valuations and infrastructure efficiency.

Source: Mergermarket, data correct as at 9-Sep-2026. *ROY stands for ‘rest of the year’ 

Flexible exits drive up China M&A dynamics

High-profile examples include General Mills’ sale of its Häagen-Dazs shops in mainland China to Chinese tea chain-store operator Ningji. Under the agreement, General Mills will continue to own and operate the Häagen-Dazs retail and foodservice operations in China.

Another is LVMH-backed travel retailer DFS’ sale of Greater China travel retail assets to CTG Duty-Free. Announced in January, the reported USD 395m deal saw LVMH and DFS’ founding family agree to invest in CTG Duty-Free. The cooperation was touted to offer both parties mutual benefits around product sales, store establishment, travel services among others in Greater China.

Global players have increasingly been seeking creative solutions to streamline their China operations. Mergermarket’s database shows a significant number of such deals are in their early stages.

Last month, South Korea-based SK Hynix was reported to be reviewing strategic options for its Chongqing facility, including a stake sale. SK Hynix also has factories in Dalian and Wuxi, China.

Gotion’s largest shareholder, Volkswagen, is planning to downsize its shareholding in the lithium-ion batteries maker, while also retaining relationship with the company. The deal is a classic example of how MNCs’ are reducing exposure but retaining meaningful ties to their investments in China.

Consumer and industrials lead carveouts

Consumer & retail emerged as the lead active carve-out sector in YTD26, with the deal count rising from two in YTD25 to five in YTD26 and accounting for USD 1.7bn in aggregate volume, according to Mergermarket database.

Source: Mergermarket, data correct as at 9-Sep-2026.

Other consumer sector deals include Abercrombie & Fitch’s exploration of strategic options for its China business, and two long running China asset sale processes by Ginko and A.O. Smith. This August, Trustar Capital was reportedly set to acquire a 30% stake in Decathlon’s China business.

Additionally, industrials and the technology sector are high on the MNCs’ carveout pipeline list. Areas of focus are semiconductors, data-intensive assets, and critical materials industries, according to one industrial-focused M&A advisor. This is primarily being driven by global regulators’ broadening screening of cross-border investments, he explained.

In the industrial space South Korea-based Simmtech is reviewing its China PCB manufacturing business, Taiwan-based LCY Chemical is divesting its mainland China unit, and Italy-based Somacis’ is selling its China assets.

In the data-intensive sector a high profile deal potentially worth USD 1bn is Singapore-based Princeton Digital Group’s (PDG) attempted disposal of its China data centres assets. In recent years Asia’s data centre developers have split their portfolios into China and non-China assets to facilitate exits amid uncertainties around foreign ownership of data infrastructure in China.