Joint fund investing heavily in Russia

China Daily USA, 12.04.2014

The Russia-China Investment Fund, a private equity fund into which each nation has committed $1 billion, will invest up to 70 percent in a broad range of Russian economic sectors.

Two years ago, the Russian Direct Investment Fund partnered with the China Investment Corp to establish the fund. Kirill Dmitriev, the fund's CEO, said during this year's Boao Forum for Asia - a meeting for Asian governments, business and academic leaders - that there are more than 20 investment opportunities in Russia, requiring at least $10 billion in funds, under government review.

The Russia-China Investment Fund is expected to raise more capital in the near future and invest more than the initial pot of $2 billion by working with large Chinese private and State-owned enterprises on joint investments.

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Dmitriev said an additional $1 billion to $2 billion is expected to be raised from Chinese and international investors.

"We believe that a number of attractive investment opportunities exist for private equity investors and other investors across a variety of sectors involved in infrastructure and modernization in Russia and sectors driven by innovation that will underpin future growth," Dmitriev said.

He said the fund recently invested $200 million to become a shareholder in Russia Forest Products, Russia's second-largest forestry company and a major timber supplier to China.

"Within several months, we will announce new investments in agriculture, tourism, infrastructure and other sectors," he said.

"We see attractive investment opportunities for RDIF and our partners in agriculture, real estate, transportation, logistics and financial services," he said. "We are also looking at innovation-driven sectors, such as alternative energy, pharmaceuticals, healthcare, telecommunications and IT."

According to statistics from the International Monetary Fund, foreign direct investment into Russia totaled $94 billion in 2013, an increase of 83 percent from the previous year, which placed Russia third in the world for total FDI inflow that year, behind the United States and China.

"The middle class in Russia has tripled over the last five years, resulting in growth in consumer demand," said Dmitriev. "We are looking at various opportunities which we believe will deliver faster growth and attractive returns on investments."

Sergey Katyrin, president of the Russian Federation Chamber of Commerce and Industry, said during the forum that Russia's economy is stable and that it is working on a national plan to improve the investment environment.

"This plan includes strengthening the development relationship with the Asia-Pacific region, exploring the Far East and introducing foreign investments," said Katyrin.

In addition to the 70 percent investment in Russia, 30 percent of the fund will go toward China.

"China promised to pump $20 billion of investment into domestic projects in Russia, with a focus on transportation infrastructure such as highways, ports and airports," Dmitriev said. "It is aiming to increase investment in Russia fourfold by 2020."

He said the trade volume between China and Russia is expected to hit $100 billion this year, a year ahead of the target set by leaders from the two countries.