The confidence recovery in the VC/PE industry is accelerating as exit prospects become more predictable.

After reaching a peak in 2021, the scale of VC/PE exits via share reductions on the A-share market declined for three consecutive years. By 2025, this trend has clearly reversed.

In recent years, factors such as capital market fluctuations and tightened IPO review processes had led to a continuous contraction in VC/PE exit volumes. However, starting from the second half of 2024, with the gradual effectiveness of macroeconomic policies, a rebound in market activity, and a recovery in the valuation of core assets, exit activities began to show signs of revival.

According to the latest report from LP Advisors, from 2020 to 2025, 1,279 VC/PE institutions collectively exited nearly CNY 720 billion through share reductions on the A-share market, involving over 18,000 transactions across 1,563 listed companies. Specifically, the total exit value for VC/PE institutions in 2025 surged to CNY 108.757 billion, a significant increase of 137.67% compared to CNY 45.76 billion in 2024, marking a return to the normalized scale of over CNY 100 billion in annual exits.

When plotted on a chart, these figures reveal a distinct V-shaped recovery. The rebound in exits has played a notable role in restoring industry confidence, particularly in boosting Limited Partners' willingness to invest. Historical data indicates that years with active exit activities often correspond to increased LP investment activity, showing a strong positive correlation.

The recovery in exits serves as another key indicator of market improvement. IPOs and subsequent share reductions not only complete the equity investment cycle but also facilitate a virtuous cycle of fundraising, investment, management, and exit. This is especially crucial given the ongoing pressure on the fundraising side.

For LPs, the ability to realize returns through exits directly influences their future investment decisions. For General Partners, exit capability has become a critical measure of fund management performance. Consequently, the industry has shifted from prioritizing investment over exits to emphasizing both exit planning and investment execution.

Amid improving liquidity conditions and the recovery of core asset valuations, VC/PE institutions are encountering a more favorable exit window. From a broader perspective, A-share IPOs and subsequent secondary market exits are not merely transactional activities; they serve as vital links connecting capital with the innovation ecosystem.

On one hand, compliant and orderly exits provide LPs with tangible returns, significantly improving Distributions to Paid-In Capital and enhancing investor confidence. This fosters a virtuous cycle where successful exits reinforce front-end fundraising efforts.

On the other hand, the recovery in exits aligns with national strategic priorities. High-quality projects gaining value recognition through capital markets further guide capital flows into key sectors such as semiconductors, advanced manufacturing, and biotechnology, promoting higher-quality synergy between technological innovation and capital markets.

IPO remains the most liquid and profitable exit route currently. While mergers and acquisitions and secondary transactions also showed growth in 2025, their overall proportion remains relatively limited, and their impact on alleviating industry exit pressure is not yet significant.

Nevertheless, market participants are actively exploring diversified exit channels, including listings in Hong Kong, M&A transactions, secondary fund deals, and asset package disposals. Both LPs and GPs maintain a positive outlook, with related transactions steadily progressing.

Concurrent with the exit recovery, structural adjustments within the VC/PE industry continue to deepen. Data from the Asset Management Association of China shows that, by the end of 2025, there were 11,523 active private equity and venture capital fund managers. The number of private equity funds stood at 29,820 with a total scale of CNY 11.19 trillion, while venture capital funds numbered 27,342 with a scale of CNY 3.58 trillion.

Compared to the end of 2024, the number of private equity and venture capital fund managers decreased by 4.6%. The number of private equity funds declined by 1.5%, but their scale increased by 2.3%. In contrast, venture capital funds saw an 8.8% increase in number and a 6.5% growth in scale.

The decline in fund manager numbers reflects ongoing industry consolidation, with smaller and tail-end institutions exiting the market. The contrasting trend of decreasing private equity fund numbers but increasing scale, coupled with growth in both number and scale for venture capital funds, indicates capital concentration towards leading institutions and a shift towards early-stage and small-scale investments.

Against the backdrop of normalized stringent entry regulations and a structural recovery in capital market liquidity, institutions with strong asset selection capabilities and sophisticated exit management strategies are gaining a competitive edge.

The consolidation of fund managers is ongoing, having decreased from a peak of approximately 15,000 to about 11,000 currently, with potential for further reduction below 10,000 in the future. The divergence within the PE/VC industry is intensifying, with leading firms strengthening their advantages, while small and medium-sized institutions lacking clear positioning or core competencies face increasing pressure. Cost reduction and efficiency improvement have become common industry practices, with many institutions still adjusting their investment strategies and team sizes.

While initial signs of industry recovery are visible, the upturn requires further consolidation. At the policy level, support for venture capital continues to intensify. The outline for the 15th Five-Year Plan emphasizes cultivating and expanding emerging and future industries, highlighting the need to enhance the overall efficiency of the national innovation system. The government work report explicitly calls for vigorously developing venture capital and angel investment, and stresses the efficient use of national venture capital guidance funds to enable government investment funds to better function as patient capital.

Driven by policy guidance and improving market conditions, the VC/PE industry is gradually emerging from a multi-year adjustment cycle. Clear policy directions for strategic emerging industries and future industries provide a focused investment theme for the venture capital sector. Meanwhile, continuous improvements in exit-related systems and tools are expected to further alleviate liquidity challenges.

At a deeper level, the changes in the venture capital industry also reflect a transformation in local development models. In recent years, regions have shifted from relying on "land finance" to "equity finance," leveraging government investment funds to attract social capital and drive industrial upgrading and technological innovation. This paradigm shift is accelerating.

However, effectively attracting social capital remains a core challenge. Currently, state capital accounts for nearly 80% of investments, while participation from social capital remains relatively low. Enhancing interest alignment among different types of LPs through mechanism design to attract more market-oriented capital will be crucial for the industry's further development.

In the long term, with gradually smoother exit mechanisms, improving capital allocation efficiency, and a continuously refined policy system, the VC/PE industry has entered a new stage focused on structural optimization and quality enhancement. Throughout this process, changes in the exit landscape will likely remain a key variable for observing industry vitality.