[Simultaneous Exodus of Digital Infrastructure and Manufacturing… Cracks Deepen in 'China, the World’s Largest Investment Destination']

Global capital is leaving China. This flight is no longer confined to manufacturing plants. The exodus has expanded to data centers and digital infrastructure, which were once hailed as the core engines of growth. Consequently, China's status as the "world's largest investment destination," which has long underpinned its economy, is severely shaking. Foreign Direct Investment (FDI) has plummeted to historic lows, and global supply chains are rapidly shifting toward Southeast Asia and India. The decoupling from China has now moved beyond simple cost considerations and entered a phase of structural realignment.

The Financial Times (FT) reported on the 23rd that "Princeton Digital Group (PDG), backed by Warburg Pincus, has initiated the process to divest its Chinese assets, valued at up to $1 billion (approx. 1.4 trillion KRW)." The report added that "PDG operates a total capacity of 286MW across data centers in seven major Chinese cities, including Langfang, Beijing, Nanjing, Nantong, Shanghai, Foshan, and Xi'an."

The FT further noted, "Analysts evaluate that this transaction is not a simple asset disposal, but rather a sign that the digital infrastructure investment model in China—which major Western private equity (PE) firms once viewed as a 'core hub for growth'—has entered a stage of structural restructuring." It reported that "while divesting its Chinese assets, PDG has secured a new 240MW data center site in Jakarta, Indonesia, and completed $856 million in financing to build a 120MW campus." This serves as a symbolic illustration of capital leaving China and pivoting toward ASEAN.

According to the FT, "Since 2017, global private equity firms such as Bain Capital, Warburg Pincus, and Carlyle poured billions of dollars into the Chinese data center market, targeting the explosive demand for cloud services from Alibaba, Tencent, and ByteDance." It pointed out that "the combination of stable rental income and a high-growth cloud market was considered one of the most attractive investment formulas in the private equity industry at the time."

However, that golden age faded rapidly. Tightened cybersecurity and data governance regulations by Chinese authorities turned foreign ownership of digital infrastructure into an increasingly sensitive political risk. Analysts also note that rising asset values driven by expanding AI demand have accelerated investors' decisions to exit.

[From Bain to Carlyle to PDG: Succession of Exits by Global Private Equity Firms]

PDG’s push for divestment is not an isolated incident. For several years now, global PE firms have engaged in a chain reaction of selling off Chinese digital assets.

Bloomberg reported that "on September 10 last year, Bain Capital signed an agreement to sell its entire stake in the Chinese operations of its data center operator, WinTriX (formerly Chindata), to a consortium led by Shenzhen Dongyangguang Industry for approximately $4 billion (approx. 5.6 trillion KRW). The transaction was officially finalized on January 16 this year."

In this deal—the largest in the history of Chinese data centers—Bain retained its Bridge Data Centres assets located outside of China. This highlights a clear strategic dichotomy: exiting China while doubling down on the rest of Asia.

In tandem, CATL (Contemporary Amperex Technology Co. Limited), the world's largest electric vehicle battery maker, announced on May 13 that it would acquire approximately 650 million Class A shares of VNET Group, a Chinese data center company, at $1.4486 per share. The transaction value amounts to roughly $942 million (approx. 1.3 trillion KRW). Upon completion, CATL’s stake in VNET will reach approximately 38%.

Behind this transaction lies what is effectively a strategic exit by Carlyle. Carlyle had invested in VNET through convertible bonds in 2020 but has steadily reduced its exposure to Chinese digital infrastructure as subsequent state-backed refinancing and CATL-linked equity acquisitions took place. CATL's recent share acquisition vividly demonstrates a structural shift, where Chinese industrial capital fills the vacuum left by exiting Western capital.

This trend is widespread. The FT reported on February 23 that "major global PE giants including KKR, Blackstone, CVC Capital Partners, Warburg Pincus, and Carlyle failed to complete a single publicly confirmed full exit from buyout investments in mainland China throughout the entire year of 2025." The publication noted that "this implies the Chinese PE market is becoming entrenched as an 'exitless market.'"

Even when exits do occur, their structure has fundamentally changed. In the past, IPOs or sales to overseas strategic investors were common. Today, sellers rely heavily on domestic Chinese buyers, particularly state-owned capital or Chinese industrial firms. This is the direct result of a sharp contraction in cross-border capital flows.

[Foreign Direct Investment (FDI) in China Plummets to Historic Lows: Numbers Prove a Structural Crisis]

Beyond the withdrawal from specific sectors like data centers, foreign direct investment (FDI) across China as a whole is recording an unprecedented, statistically proven plunge.

Bloomberg previously reported on February 24 last year that "in 2024, China's net FDI recorded a net outflow of $168 billion, the largest since data collection began in 1990."

The Mitsui & Co. Global Strategic Studies Institute also revealed in a report published in April last year that "in terms of actual inward FDI flows, foreign direct investment into China in 2024 stood at a mere $4.5 billion, hitting its lowest level since 1991." The report emphasized that "this represents a staggering drop to just 1.3% of the peak of $344.1 billion recorded in 2021."

This past January, China’s Ministry of Commerce (MOFCOM) announced that "the actual utilized foreign investment in China for the full year of 2025 was 7.4769 trillion yuan (approx. $104.7 billion), down 9.5% year-on-year." It added that "FDI dropped by an additional 5.7% year-on-year in the January–February period of this year."

The U.S. Department of State also pointed out in its '2025 Investment Climate Statements' that "anxiety among foreign enterprises persists as China pressures tech companies to keep manufacturing and R&D facilities within its borders, while simultaneously strengthening state control over data collection, storage, processing, and sharing." The fact that China remained on the U.S. Trade Representative’s (USTR) Priority Watch List for intellectual property protection in 2025 underscores these growing concerns.

Analyzing these compounding factors, the Australian Institute of International Affairs (AIIA) explained: "The widening interest rate differential between China and major economies, a prolonged real estate slump, sluggish domestic consumption, and escalating U.S.-China tensions are collectively dampening multinational corporations' appetite for expanding operations in China."

['The World's Factory' Is Crumbling: The Great Realignment of Manufacturing Supply Chains]

Simultaneously with the flight of financial capital, global manufacturing supply chains are rapidly restructuring to reduce their reliance on China. This trend has accelerated due to a triple whammy of U.S.-China trade conflicts, rising labor costs, and geopolitical uncertainties.

Since April 2026, Apple has handled $14 billion worth of iPhone assembly in India alone and plans to manufacture 25% of all iPhones there by 2028. iPad production has been relocated to Vietnam, and a portion of MacBook production has also shifted there. Google has transferred Pixel smartphone production to Vietnam and India, while Samsung continues to expand Galaxy smartphone production in both nations.

HP has accelerated its timeline even faster. The company moved up its plan to shift production away from China for products bound for North America—originally scheduled for completion by September 2025—to June. It has now completed the relocation of nearly all U.S.-bound imports to India, Mexico, Thailand, Vietnam, and the U.S. mainland.

In a related move, the American Chamber of Commerce in China stated, "Out of 360 responding companies, 30% are considering or executing relocations of their production bases." It added, "25% of tech-related companies are currently altering their supply chains, with iconic American corporations like Intel, Microsoft, Nike, and Dell either hinting at or actively executing the relocation of some manufacturing facilities out of China."

McKinsey also noted in a 2025 research report that "more than 42% of U.S. multinational corporations with manufacturing hubs in China have initiated full or partial exit procedures." The firm added, "Data shows that in 2025 alone, more than 22,000 U.S.-linked production lines were relocated outside of China."

South Korean companies are no exception to this trend. The Beijing office of the Korea Institute for Industrial Economics & Trade (KIET) stated in its '2025 Survey on the Business Environment of Korean Companies in China' published in January: "9.7% of responding companies projected completely exiting their China operations within the next five years, while 20.9% anticipated scaling down." Responding firms cited intensifying local competition in China, sluggish domestic demand, and supply chain disruptions stemmed from U.S.-China tensions as the primary causes of their declining revenue in 2025.

Instead, relocation to Southeast Asian nations—including Vietnam, Thailand, and Indonesia—is accelerating. Foreign investment into Southeast Asia surged by 70% over five years to reach $230 billion in 2023, and this upward trajectory continues well into 2026.

[Where the Capital is Heading: Malaysia, Japan, and India Emerge as New Destinations]

The reallocation path of funds recovered from China by global PE firms and multinational corporations is clear: they are concentrating on Asian nations characterized by high political stability and immense growth potential for AI infrastructure demand.

Headquartered in Singapore, PDG currently operates more than 20 data centers across China, Singapore, India, Indonesia, Malaysia, South Korea, and Japan. Instead of maintaining its Chinese assets, it is funneling billions of dollars of new capital into Indonesia.

KKR led a consortium to acquire Singapore-based STT GDC for $5.2 billion, while Blackstone and the Canada Pension Plan Investment Board (CPPIB) acquired Australia's AirTrunk for $16.1 billion in 2024. All of these players have chosen to expand investments in Asia-Pacific digital infrastructure outside of China.

The same holds true for the manufacturing sector. Foreign direct investment into Southeast Asia has increased exponentially over the past five years, with Vietnam, Malaysia, Indonesia, Thailand, and India emerging as the primary alternatives for capital fleeing China.