"PAG's China Picture Is Just Beginning to Unfold, as 'One Step Forward, One Step Back' Sets Two Records"

"Only pick the fruit you can see." By Zhiyan Chen

Over the past year-plus, PAG has set two industry records in China's private equity market. Its consortium-led controlling investment in Zhuhai Wanda Commercial Management, at over 60 billion yuan, became the largest single PE investment in Chinese history. Meanwhile, the closely watched exit from Air Liquide's core business (Yingde Gases) stands as the largest exit transaction ever in China's private equity market.

This precise "one in, one out" maneuvering not only demonstrates the formidable capital strength and execution prowess of this Asian buyout giant, but also sketches out its distinctive playbook and strategic vision for the China market.

Part 01

"The Exit": A Textbook Buy-and-Build

PAG's series of moves with Yingde Gases stands as a textbook case of "buy and build." Though these transactions have been chronicled countless times, they're worth revisiting.

The Yingde story began in 2017. At the time, shareholder infighting had engulfed the company. PAG took it private at HK$6 per share, for a total cost of 10 billion yuan, setting a record for the fastest completed full tender offer in Hong Kong Stock Exchange history.

After delisting, PAG optimized the management structure and restructured the business footprint, while using capital as a bond to drive industry consolidation and industrial upgrading through M&A.

In 2018, riding the wave of SOE reforms emphasizing "focus on core business," PAG scored again by acquiring Baosteel Gases — a "peripheral business" from Baowu Group. Following this deft carve-out, PAG merged Yingde Gases with Baosteel Gases in 2021 to form Gas Power Technology Co.

Through post-investment operations, the company achieved substantial growth and financial returns. EBITDA surged from roughly 2.6 billion yuan in 2016 to nearly 7 billion yuan in 2023; annual profit exceeded 3 billion yuan.

In January 2025, PAG successfully sold the core industrial gases business (retaining a 25% stake and continuing to hold the clean energy business), recouping tens of billions of yuan. Over seven years, PAG had built Asia's largest industrial gas industry leader and ultimately handed it back to domestic capital, completing the capital cycle.

Part 02

"The Entry": A Resilient Reversal

If the Yingde exit was a complex and meticulously orchestrated "open strategy," the investment in Zhuhai Wanda Commercial Management has more often been interpreted as a "bottom-fishing" move dancing on the edge of crisis. Yet what PAG actually focused on in this deal has never been truly understood by outsiders.

This transaction first began in 2021. At that time, a PAG-led consortium completed a $5.3 billion pre-IPO investment in Zhuhai Wanda Commercial Management, with PAG contributing $2.8 billion. The investment carried the well-known "betting" clause that Zhuhai Wanda Commercial Management must complete its IPO by end of 2023; if not, Dalian Wanda would need to buy back the investors' shares.

By end of 2023, the IPO had stalled. Beyond its heavy debt load, Dalian Wanda faced buyback pressure in the tens of billions.

At this critical juncture, PAG demonstrated remarkable resilience. Where most investors might have chosen to reduce or exit, PAG — knowing that crisis contains opportunity — decisively doubled down.

In 2024, PAG led a new consortium to complete this "deal of the century" worth 66 billion yuan. Upon completion, the buyer group led by PAG held 60% of the newly formed "Xin Da Meng," with Dalian Wanda holding 40%. The PAG-led consortium became the largest shareholder of the world's biggest shopping mall operator.

Two key questions surround this transaction —

First, what exactly did the PAG-led buyer group purchase?

Public opinion tagged it as "bottom-fishing" in real estate. But the fact is, the target "Xin Da Meng" is a light-asset commercial management company that owns no mall properties whatsoever. It manages over 500 shopping malls and more than 100,000 merchants nationwide. What the PAG-led consortium bought was not high-risk property-heavy assets, but an extremely reliable "cash cow." Even during the pandemic, dividends to shareholders rose year after year: 4.6 billion yuan in 2021, 6.7 billion yuan in 2022, 8.8 billion yuan in 2023. From another angle, even if PAG was "betting," it wasn't betting on real estate — it was betting on the "service fee rights" of China's offline retail sector.

Second, why did the "teammates" change?

The 2021 investors included Chinese tech giants like Tencent and Ant. In the 2024 new buyer group, Middle Eastern sovereign wealth funds such as ADIA and Mubadala appeared. In this transaction, PAG played the role of "super connector," using its global network to link Middle Eastern capital seeking to allocate to Chinese core assets with Wanda, which urgently needed long-term capital, completing a restructuring of the capital landscape.

Part 03

Why PAG?

Anywaves (暗涌Waves) noted in previous M&A coverage that funds capable of executing large-scale buyouts in China while maintaining full post-investment "buy and build" teams number "no more than five" in the market. The record-setting "one in, one out" described above proves PAG is among them.

Looking deeper, PAG's M&A style displays extreme "discipline" and "resilience."

PAG, led by Shan Weijian, is known for being "traditional, grounded, and cautious." Its valuation requirements are exceptionally strict; it insists on "not buying expensive goods." This creates a deterministic "safety cushion" for generating returns.

According to Anywaves, PAG's team includes not only senior executives with investment banking backgrounds but also numerous former industry executives. More critically, core team members average 8-9 years of tenure — remarkable stability in finance circles. This ensures PAG can provide years of deep empowerment and long-term companionship to portfolio companies, leaving sufficient time and space for corporate transformation and development.

On the other hand, PAG's ethos of "never giving up until the deal is done" gives it astonishing resilience amid volatile, complex buyout transactions and an increasingly challenging market environment.

This was fully demonstrated in the Yingde case. PAG's original exit plan was to sell to Hangzhou Capital (parent of Hangyang), to drive consolidation of China's two industrial gas giants. However, this closely watched integration plan was ultimately shelved. Facing the change, PAG rapidly restructured the buyer group, bringing in Ping An, Sunshine, and other large insurers along with 12 banks, while Hangzhou Capital's role shifted from "lead acquirer" to "financial investor." PAG pulled a transaction that had gone sideways at the "last minute" back on track, ultimately completing this epic exit.

What underpins this resilience is PAG's consistent market insight and capital command. As Shan Weijian put it: "Investment opportunities are rare and unpredictable, but you must always be prepared."

Part 04

Core Market, Core Allocation, Core Position

In today's investment industry, the China market is undoubtedly a topic full of contradictions. On one hand, macroeconomic challenges, volatile geopolitical dynamics, and uncertainty amid industrial transformation have given many international investors pause. Yet within this fog of caution, PAG displays a strikingly different posture — decisive, sustained, and unwavering in its deep cultivation of the China market.

This June, PAG's first RMB fund landed in Suzhou with a first close of 3.1 billion yuan, focused on buyout transactions. While numerous foreign investors hesitate over how to approach the China market, PAG sees opportunity in China's M&A market still being a "blue ocean," and is prepared to participate actively with a "two-pronged" combination of local and foreign capital, deploying ample capital.

"In the long run, China's domestic capital should be the dominant capital driving China's private equity sector, not overseas capital."

At PAG's office on Shanghai's Nanjing West Road, we met David Wong, PAG Partner and Co-Head of Private Equity.

Consistent with PAG's sparse external image, this investor with rich experience at top institutions like Morgan Stanley and TPG is humble, rational, and highly structured. He shared with Anywaves the thinking behind PAG's choice to continue deepening its China market presence —

Most fundamentally, it's the conviction that China's M&A market is large enough, with few participants of genuine capability. Second is strategic consideration of capital sources: from the objective situation of PAG's existing USD LPs, investing in Asia-Pacific has always been a peripheral, niche allocation in North American and European LP portfolios. "But in the China market, it's not like this. Chinese domestic institutional investors will definitely invest primarily in their home market. So, if PAG can perform well in the RMB market, it means occupying a core position in this massive core market, in this core allocation."

During the conversation, David Wong avoided discussing transaction details, but elaborated on PAG's M&A logic and methods, the decision-making behind the two latest cases of Yingde Gases and Xin Da Meng, and his insights on China's investment industry from nearly 30 years of experience.

From this, you'll discover that the core of how PAG could complete a case like Yingde Gases — combining LBO, privatization, acquisition, merger, integration, and sale into one complex transaction — and steer it to a happy ending, lies in its proactive pragmatism stripped of any grand ambition, and its sufficient reverence and respect for the essence of M&A.

The following conversation has been edited and condensed by Anywaves —

Part 05

The Hardest Part of M&A Is the "Operator Mindset"

Anywaves: The Yingde Gases deal involved LBO, privatization, acquisition, merger, management adjustments, and various other transaction types and value creation levers. In such a complex investment, what do you see as the real difficulty?

David Wong: The hardest part is mindset — are you willing to see yourself as the operator? In China's PE market, most financial investors provide equity financing to companies, banks provide debt financing. Neither type of capital needs to see itself as the operator, because the company has its own boss.

But in control buyouts, once the deal closes and you take over the company, the investor is responsible for the operating results and ultimate investment returns — no one else will worry about this for you. As an investment institution, do you have the mindset to become the operator behind a company, not merely a financing provider? This is a critical question requiring a breakthrough in mentality.

Facing an organization, there's greater uncertainty, including human factors, market factors, competitor factors, and so on. This requires investment institutions doing buyouts to be mentally prepared both pre- and post-investment.

Anywaves: Doing M&A seems to inherently test one's mentality. For instance, the classic question: "Why would anyone sell something good?"

David Wong: You're absolutely right. The first psychological hurdle to overcome in buyout investing is "the seller always knows more than the buyer." This hurdle isn't easy to overcome. Even after doing M&A for so many years, we still find this hurdle difficult internally. With minority equity investments, it's easy to understand when a company wants financing to grow. But why would a company sell? Why might selling to someone else give the company greater opportunity? This is the question mark facing every transaction.

Anywaves: In the Yingde Gases buyer group, we saw primarily domestic institutions, including domestic insurance companies and state capital. Is pivoting exits toward Chinese domestic capital PAG's latest exit strategy?

David Wong: From a long-term perspective, China's economy today is equivalent to over 70% of the US economy. The mainstream capital or institutional investors investing in China will definitely be domestic; economic activity will definitely rely primarily on domestic institutions. This is the same in the US market, the European market — selling assets to foreign investors is the exception.

Anywaves: Why did PAG ultimately retain 25% equity in Yingde Gases?

David Wong: Mainly to maintain operational continuity and strategic consistency, ensuring effective corporate governance post-transaction. Other investors make decisions more from an equity investment perspective, while PAG, with years of accumulated experience, can as the largest single shareholder post-closing lead the buyer group to create more returns.

Anywaves: Regarding the sale of Yingde Gases' core industrial gas business, some reports cited a transaction valuation of roughly $6.8 billion, with informed sources saying PAG made 8x on this project. Is this figure accurate?

David Wong: We don't comment on transaction returns, but since acquiring Yingde Gases, PAG has enhanced the company's profitability through management adjustments, idle asset revitalization, bolt-on acquisitions, digitalization improvements, and international expansion.

We also took multiple measures to unlock the complementary potential between Yingde Gases and Baosteel Gases, including improvements to financial structure and operational efficiency, optimization of management and organizational restructuring, bringing in industry experts, assembling a new management team, and stimulating organizational vitality, achieving scale effects after business integration. These aspects all yielded significant results.

Anywaves: Compared to the present, exit market sentiment was depressed. Why did PAG need to seek exit for Yingde Gases between late 2024 and early 2025?

David Wong: During our investment in Yingde, we indeed experienced numerous macro challenges both domestic and international, including COVID-19's supply chain shocks, real estate market adjustments, and geopolitical tensions. But China has a rapidly developing industrial market; investors believe the sustained high-speed growth of industrial gas demand can bring highly resilient revenue. Given our fund's nature, when it's time to exit, we must seek exit and strive to achieve DPI.

Part 06

One Strategy: Special Situations + Distressed Restructuring

Anywaves: When PAG first encountered the Yingde Gases project, sudden conflict erupted among its three shareholders. This clearly wasn't answering "why would anyone sell something good," but rather how to see opportunity in danger. How did PAG internally think about this project at the time?

David Wong: Why did the shareholder conflict arise? There was actually historical context. At the time, most of Yingde's downstream clients were in the steel industry. And the steel industry experienced a rather severe downturn during 2014-2016, also the period of China's steel trade crisis.

Looking deeper objectively, although the steel industry was then weak, over 95% of Yingde's clients were still paying normally. Second, Yingde's downstream clients had sufficient scale; we expected to be able to address the risk of steel capacity decline at the time. Third, and more importantly, the air separation segment, while a small cost for the steel industry, is critically important in use — an indispensable, necessary link in the industrial chain involving the entire plant's operation. Whatever the steel industry's future trajectory, however good or bad its performance, industrial gas is a necessary segment.

Anywaves: Industrial gas is a rather distant industry for most people. How could you build more knowledge about this industry than others in such a short time?

David Wong: For every investment, we must understand its business logic and the logic of its business model, and the boundaries between them, to judge the sustainability of cash flow. Second, we judge how much development space the industry has. As for specific technologies or new technology iterations, we don't necessarily need to understand them first. We first look from an asset perspective at whether cash flow is solid, whether it's sustainable; second, we need to understand a sufficient margin of safety, to see where the downside lies.

Anywaves: Excavating opportunity at moments of corporate crisis seems to be a strategy PAG skillfully employs in its M&A transactions. Not only in the Yingde case, but Wanda Commercial Management (Xin Da Meng) was similar.

David Wong: Under special situations conditions, things are usually complex, so there's limited competition, and the current market environment supports such transactions. In the Xin Da Meng project, we invested in a light-asset commercial management company, not real estate — many people misunderstand this. Doing M&A is like this: if you don't deeply understand, it's genuinely hard to make good judgments.

Anywaves: But people are always influenced by external environments and public opinion. In the Wanda case, how did you persuade the final decision-makers?

David Wong: It wasn't a matter of "persuasion." Our investment team made this judgment together. At PAG, no one needs to persuade anyone; our investment team makes decisions collectively. Investment is our business; we ourselves must have reasonable risk and return assessments.

Anywaves: Was the judgment difficult to make in the Wanda Commercial Management project?

David Wong: Actually it wasn't difficult to judge; this project was a rare opportunity from our perspective. Although the market was flooded with various evaluations of this company, or even risk warnings, some of which may have been correct. But the real situation also had incorrect aspects. We consistently have great confidence in China's consumer market and retail market. Xin Da Meng is the largest commercial management company in China and even the world, and PAG became a shareholder of Zhuhai Wanda Commercial Management in 2021, with full understanding of the company's business and team. Even during the pandemic, Xin Da Meng's profits and cash returns gave investors tremendous confidence. Xin Da Meng's managed malls spread across the country, a microcosm of ordinary Chinese people's consumption. The company has excellent growth potential and broad market space, with considerable development in exporting management externally. We believe new capital joining will greatly boost company morale and enhance potential.

Part 07

PAG's Local Lens

Anywaves: How do you understand the current macro environment as favorable for buyout-type investments?

David Wong: In my 25-26 years in the industry, for the first time, RMB interest rates are substantially below USD rates, and overall, the medium-term outlook is expected to be a downward channel. By normal logic, declining rates should mean rising asset prices. But currently in China, asset valuations are generally relatively low — it's a buyer's market.

In such a macro environment, low asset valuations mean future asset returns will be richer, plus relatively low funding costs mean equity returns will be significantly enhanced.

Today's buyout-type investments have very favorable macro conditions supporting them. Against this backdrop, buyout transactions are expected to deliver high double-digit returns.

Anywaves: You recently attended a summit and mentioned the observation that "doing M&A in China is a blue ocean." But in fact, over the past two years, we've already heard so many voices saying they're going into the M&A market, to the point where it's the only story for growth-stage investment institutions.

David Wong: China's economy today, by nominal GDP, is roughly 77% of the US. China's M&A market is similarly massive, the world's second largest. But in China, the M&A market is currently dominated by strategic buyers and listed companies; financial investors or PE funds participate in M&A at relatively low levels, perhaps only a few percent. In contrast, in the US, PE institutions have very high participation in the local M&A market, even exceeding half of the entire M&A market.

In the domestic market, professional M&A-focused institutions like PAG remain rare — you can count them on one hand. Even at full capacity, these institutions only do about 20 or so M&A deals per year. In the US, the number of institutions at PAG's scale is likely in the triple digits. That is, the supply of professional M&A institutions in the China and US markets differs by multiples of ten — it's an order-of-magnitude difference, not a proportional gap.

So we believe China M&A remains a blue ocean market: the entire market is large enough, but truly professional M&A participants are very few.

Anywaves: Previously, China's most influential M&A transactions were almost exclusively executed by foreign PE. How do you view opportunities for domestic capital in the future M&A market?

David Wong: China has actually developed into a continental or even global economy. At this scale, localization of the M&A market is a very natural development. I believe China's domestic capital should be the mainstream capital driving the private equity sector, not capital from overseas. For any large-scale market, being driven by overseas capital is an abnormal situation. So this is also a core reason PAG raised its RMB fund.

Anywaves: People always say investing requires some "gambling instinct," but listening to you describe PAG's M&A methodology, it seems very rational and prudent.

David Wong: Doing VC, you must see how the future world differs from today's world — this is extremely challenging, extremely difficult work. Doing buyouts, you can't rely on assuming what special changes the world will undergo, or what help certain special changes will bring to a company. We must first see the fruit we're going to pick, not plant a fruit tree. In this process, we need methods for picking fruit ourselves, accumulating experience and confidence. In many cases, there's clearly a fruit here that others don't see because their view is blocked, but I see it first, so I have the chance to pick it. But if from one fruit you see ten fruits, that's relatively good luck.

Layout | Nan Yao Image source | Unsplash

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