Russia, China confirm $4b joint investment fund
Russia and China have confirmed plans for a joint $4 billion investment fund, which will be backed by initial $1 billion contributions from their respective sovereign wealth vehicles. Progress on the fund was announced at an economic forum in Moscow attended by Chinese Vice Premier Li Keqiang and Russian First Deputy Prime Minister Igor Shuvalov on Saturday.
Following the $1 billion commitments from the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), the remaining $2 billion is expected to be generated from other Chinese institutional investors. The new vehicle is earmarked for launch by the end of June 2012.
Engineering, agriculture, forest and timber industries, transportation, and logistics are among the target sectors. Special attention will also be given to energy efficiency and energy saving projects.
According to a statement, up to 70% of the raised capital will be invested in projects across Russia and other CIS countries, while the remaining 30% will back Chinese businesses with Russian involvement. Joint investments from the two countries are expected to inject hundreds of millions of dollars into the Russian economy.
"By creating the Russia-China Investment Fund, the RDIF and China Investment Corporation will once again highlight the strong results of economic cooperation between Russia and China," Kirill Dmitriev, CEO of the RDIF, said during the forum.
A joint venture company has been set up to run the fund, with RDIF and CIC controlling 60% and 40%, respectively. In late 2011, the two parties signed a memorandum to establish the Russia-China Investment Fund at a meeting between prime ministers of Russia and China. CIC's pledge is the first from an external party to invest with the RDIF.
Established in June 2011, RDIF is expected to receive $10 billion in Russian government funds over the next five years. In every investment, the sovereign fund is required to secure co-investments that at least match its own commitments. This is intended to facilitate investment into the Russian economy.
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