A total of 4,559 deals were completed in the first six months of the year, up 10% from the same period last year, with overall deals worth 60% more, PwC said.
The majority of activity relates to domestic M&A, which is up by 60%, but "inbound strategic buyers remain active", PwC said. While domestic M&A is expected to slow in the second half of 2015, foreign inbound activity is less affected by the Chinese equity capital markets and will remain firm, PwC said.
"The hottest sectors for domestic and foreign inbound deals have been technology, financial services and real estate," said Leon Qian, of PwC China. "There are a number of drivers behind this. The Chinese government is looking to technology and innovation to transform its economy. Real estate developers have been in need of fresh capital. And financial services have had to adapt to meet the growing needs of local retail and SME markets."
Outbound M&A deals were also significant, PwC said, with the number of deals up 17% to 174, and the value up 24% to $27.2bn. This is likely to continue to grow in the second half of the year.
"Private companies are looking overseas primarily for new products and technologies that they can bring back to the domestic market as it becomes more and more driven by consumer demand," Carol Wu of PwC China said.
Privately owned enterprises led the charge in outbound M&As, up 50% by number and 148% by value.
Shanghai-based M&A expert Bernd-Uwe Stucken of Pinsent Masons, the law firm behind Out-Law.com, said: "I think this reflects the new long-term trend where privately owned enterprises are becoming active players in the outbound investment area while state owned enterprises activities are somewhat slowing down."
"My contacts in Shanghai say that privately owned enterprises are primarily looking for technology enterprises who can help them to upgrade their operations back home in China, which is quite in line with the findings of PwC. This is good news for Europe as European companies seem to rank high among attractive targets for Chinese investors. I believe that the private sector will play an important role in the current transformation of the Chinese economy," Stucken said.
International acquisitions are being made as a way into new markets, particularly in Australia and Asia, Wu said.
PwC expects activity to slow slightly in the second half of the year because of problems in equity markets, but outbound mergers and acquisitions will continue to grow driven by increasingly experienced Chinese mainland buyers, and 2015 as a whole should still be a record year, it said.
Private equity deals also grew in value by 62% to $62.4bn, another half-year record, PwC said. There is a "real focus on technology plays, especially internet-related, as this sector is seen as 'on strategy' for China," PwC said.