Joint fund on hunt for investment opportunity

China Daily, China.org.cn, 03.05.2013

Chinese and Russian sovereign wealth funds are ready to double the size of their joint equity fund and increase its investment projects this year.

Kirill Dmitriev, CEO of Russian Direct Investment Fund, told China Daily it plans to double its joint private equity fund with China Investment Corporation to $4 billion.

Six to seven new deals will be made in 2013 thanks to warming bilateral relations.

Establishment of the $2 billion Russia-China Investment Fund was announced during Russian President Vladimir Putin's visit to China last June.

The fund made its first investment of $200 million for a minority stake in Russia Forest Products, the country's second-largest forestry company.

The fund is looking for investment opportunities in other areas including agriculture, logistics and machinery in China and Russia, said Dmitriev.

"We want to do three or four deals in each of the key sectors of the economy, because the value is not only to get returns, but also to set examples to show that Russian and Chinese businesses can invest together and make returns together," he said.

He said the fund, the first such joint fund among BRICS (Brazil, Russia, India, China and South Africa) and APEC economies, can serve as an example of synergy for other countries.

Some investors from Australia and other nations are becoming interested in the fund, and will probably be introduced as limited partners to share the risks, but the two general partners will hold decision-making power, he said.

Dmitriev serves as co-CEO of the Russia-China Investment Fund, while Hu Bing from the China Investment Corporation is its president and co-CEO.

Making money and getting returns is a principle for choosing projects. The fund will look at large and established companies and then consider small to medium-sized enterprises, Dmitriev said.

Dmitriev is a member of a Russian state delegation led by Russian First Deputy Prime Minister Igor Shuvalov that visited Beijing last month to follow up President Xi Jinping's first official visit to Russia.

"The whole idea of Russia and China working together is not just a myth. It's a reality and obviously there is increasing investment to grow," he said.

Total investment by China Investment Corporation in Russia was $5.6 billion in 2012, about 90 percent of that invested in the last year, he said.

On his trip, Dmitriev met presidents of the "Big Four" Chinese commercial banks, all of which have opened subsidiaries in Russia.

"We want to have some agreements with them to provide financing support for the projects we do. ... Just very natural cooperation, we bring some deals to them, we can provide some equity and they can do some debts, " he said.

Russia's swinging investment policies have previously hampered some Chinese investors' efforts in exploring the Russian market.

There was resistance from some of the governors and local business people, but things are changing because Russia and China are closer politically, he said.

Also, local governors were told by Putin they would be judged by their capacity to attract investment into their regions.

"Nobody is doubting Russia will grow, but people say it's also a risky place to invest. What we are trying to do is to reduce risks of investors," he said.

"Russia is focusing on countries that have growth potential. In a world where Europe is declining and other countries are having issues, Russia is focusing on the Asia-Pacific region. We really want to find synergy by growing with other Asian countries," he said.

Bilateral trade between China and Russia hit a record $88.16 billion in 2012, up 11.2 percent year-on-year. By comparison, trade between China and the United States was $484.68 billion in the same year. But China and Russia set a goal to raise their bilateral trade volume to $100 billion by 2015 and $200 billion by 2020.