Later this year, China Music is expected to be one of several Chinese internet companies that go public with multibillion dollar valuations. Executives and bankers believe the online streaming service could be worth as much as $30bn, making it one of the most lucrative deals in the portfolio of Hong Kong-based private equity firm PAG, and its rainmaker Shan Weijian.

The PAG chief executive, who bought China Music several years ago, will not be the only beneficiary, though. In 2016, he sold half his stake to Tencent at a bargain price and merged China Music with Tencent’s far smaller music streaming operation — the merged entity now carries Tencent’s valuable name.

At first glance, a deal with such favourable terms for Tencent might seem strange. But the value of the business lies in the licences to broadcast music, some of which are as short as two years. When they expire, Tencent’s deeper pockets mean it could easily afford to outbid PAG. Joining forces was the lesser evil, Mr Shan says.

“We were both shareholders of China Music,” says Mr Shan. “A merger made a lot of sense because with the deep pockets of Tencent, the combined business is much better positioned to compete for copyright licences and to grow.”

The China Music story shows just how hard it can be to say no to Tencent — and the other big player in the Chinese tech world, Alibaba. With their large resources and long-term perspective, the two Chinese groups are transforming Asia’s investment landscape, posing challenges for private equity and venture capitalists as well as the start-ups looking for funds. In some parts of the region, SoftBank, the Japanese investment group, is playing a similar role.

“Today, Ali and Tencent are so powerful. They are adaptors, not innovators,” says the China head of one international private equity firm with expertise in technology. “The system needs checks and balances. But will they stop innovation? Can they control their own power?”

If the venture capital market in China has become a fierce battle between Alibaba and Tencent, in other parts of the region it is often a three-pronged competition that also includes SoftBank.

Some private equity executives fear that there is little they can do in the short term to compete with Alibaba and Tencent, at least in China. “You need to see them in historical perspective,” adds the head of one international private equity firm’s China office. “This is still the robber baron age. It is a process.”

For entrepreneurs, the trick is to find ways to minimise the risks attached with rich new investors. “The important question is what is the quality of the investment,” says Alok Kshirsagar, a senior partner of McKinsey in Mumbai. “The best thing to do is play ecosystems against each other.”