Core Insights - The secondary market for private equity (S transactions) in China is gaining prominence, with a transaction volume of 1,078 billion yuan in 2024, marking a 46% increase from 2023 [1][2] - The market is expected to continue its growth trajectory, with 542 transactions recorded in the first half of 2025, surpassing the total number of transactions in 2024 [1][2] - State-owned enterprises (SOEs) are becoming a significant variable in the S transaction market, influencing both the buy and sell sides of transactions [4][5] Market Growth and Trends - Since 2018, the S transaction market has experienced an average annual growth rate exceeding 50%, with the total transaction volume surpassing 1,000 billion yuan for the first time in 2022 [2] - The recovery of the S transaction market is attributed to favorable policies and market conditions, particularly following the "9·24" policy change, which has boosted market confidence [2][3] - The Chinese government has officially encouraged the development of S funds, with multiple policy statements supporting the growth of the secondary market for venture capital [2][3] Role of State-Owned Enterprises - SOEs have emerged as the largest sellers in the S transaction market in 2024, driven by the need to liquidate early-stage funds and optimize state assets [5][6] - The demand for transferring SOE shares has increased significantly, indicating a shift from minimal participation to becoming a major player in the market [4][5] - The successful transfer of SOE shares is expected to enhance market liquidity and increase the volume of tradable assets [4][5] Diversification of Transaction Models - The S transaction market is witnessing a diversification of strategies, including fund share transfers, GP-led transactions, and structured deals, reflecting the evolving needs of market participants [7][8] - New transaction models aim to address the dual demands of value preservation and return on investment for SOEs, as well as regional economic development [7][8] - The introduction of structured transactions caters to different risk appetites among limited partners (LPs), with a focus on both debt-like and equity-like returns [8] Future Outlook - The S market is projected to evolve from a niche market to a core ecosystem within the private equity industry, driven by the exit demands of 15 trillion yuan in existing assets [9][10] - The market is expected to see a shift towards more professional and diversified trading practices, enhancing the ability of institutions to capture investment opportunities [9][10] - The development of standardized solutions and improved infrastructure will be crucial for overcoming existing barriers and promoting the growth of the S transaction market [11]