Russia, China to set up $10bn RMB joint fund

Infrastructure Investor, 06.07.2017

"The two countries’ sovereign wealth funds will inject another $1bn into an existing Russia-focused vehicle, which also looks to raise $2bn from third-party investors.

The Russian Direct Investment Fund and the China Development Bank plan to establish a renminbi-denominated vehicle to invest in Russian and Chinese projects, including those under the China-led “One Belt, One Road” and Eurasian Economic Union initiatives.

The China-Russian RMB Investment Corporation Fund, with an expected size of 68 billion yuan ($10 billion; €8.81 billion), will raise capital from Chinese investors and provide a simplified framework for direct investments settled in the national currency, according to a memorandum of understanding.

RDIFwill invest in the vehicle through the Russia-China Investment Fund, which was jointly created by RDIF and China Investment Corporation in 2012, while CDB will participate in the scheme via its wholly owned subsidiary China Development Bank Capital. 

CIC and RDIF have also agreed to make an additional $500 million capital pledge each to the Russian-China Investment Fund, under another memorandum of understanding.

The two sovereign wealth funds established the RCIF in 2012 with a total commitment of $2 billion to invest in businesses and projects in both countries.

The fund’s investment remit encompasses infrastructure, mining and resources, agriculture, advanced manufacturing, retail and financial services. About 70 percent of the vehicle is due to be invested in Russia, with the rest to be deployed in China.

The RCIF has so far deployed $1 billion through 19 investments in the wood processing, transport infrastructure, financial, technology and consumer sectors. Its portfolio includes a joint venture with OJSC Far East and the Baikal Region Development Fund to construct the first-ever railway bridge over the Amur river on the border between China and Russia, and an investment in Didi, China’s car-sharing transportation platform.

The private equity fund is open to third-party investors, which can contribute up to $2 billion of additional capital.

“So far, the RCIF has generated good investment returns and raised its reputation in China-Russia investment,” said Qing Zhang, executive vice-president of CIC’s direct investment arm, CIC Capital Corporation.