A multibillion-dollar investment fund set up by Russia and China is expected to make its first investment in a Russian forestry company, as economic ties between the neighboring countries grow closer. Source: Reuters
Plans for the fund – a venture between sovereign wealth fund China Investment Corp (CIC) and the state-backed Russian Direct Investment Fund (RDIF) – were announced last year.
The fund will be unveiled during a visit by Vladimir Putin, who is making his first trip to Beijing since his return to the Russian presidency and will meet Chinese counterpart Hu Jintao.
“This visit is really key to establish a breakthrough in Russia-China relationships,” Kirill Dmitriev, CEO of the Russian Direct Investment Fund, told Reuters in an interview.
“In the past there were lots of discussions on the topic but very little progress – the amount of Chinese investment in direct equity (in Russia)… is very small. But (now) there are some concrete examples.”
The first investment is expected in the next month and is likely to be into one of Russia’s largest forestry firms, which exports a substantial amount of wood to China according to Dmitriev.
It will aim to allow the forestry company to make higher-margin processed wood products in Russia, which it can export.
An initial investment could be around US$200 million for a minority stake.
The RDIF was created to give major foreign investors greater comfort in Russia’s uncertain business environment and is investing with private equity, strategic investors and sovereign wealth funds. It is separately investing alongside China.
The RDIF and CIC will contribute US$1 billion to the fund. Dmitriev has said he expects it will take about 18 months to expand the Russian-Chinese investment fund to US$4 billion, with the balance of the capital raised from outside investors.
It is expected to invest 70 percent of its funds in Russia and up to 30 percent in China, Dmitriev has said “the pipeline of potential deals for this fund includes industries such as forestry, machinery (and) logistics.”