China rolls out $8b fund to back outbound investments
China has launched a RMB50 billion ($8 billion) fund in Shanghai to aid overseas acquisitions by Chinese companies. The fund, which is the largest international renminbi-denominated vehicle ever created, has already raised RMB12 billion.
The new vehicle, known as Sailing Capital International, is intended to provide loans and equity to support Chinese companies in overseas expansion. It is part of the government's efforts to promote the use of renminbi for pricing, transaction and settlement in cross-border investments.
The fund will eventually leverage its size to over RMB150 billion via bond issuance or setting up subsidiary funds, the central government said in a statement posted on its official website. Meanwhile, it has already received investments from both state and non-state owned enterprises, listed companies and financial institutions.
Tu Guangshao, vice mayor of Shanghai, said the new fund would play an important role in Shanghai's emergence as a hub for renminbi-denominated asset management and cross-border investment.
Chinese investors are increasingly looking at cross-border transactions. The cumulative value of outbound deals increased tenfold in the last 10 years to $68 billion in 2011, according to a research by A Capital, a Hong Kong-based private equity firm focuses on cross-border transactions involving Chinese companies.
Last March, A Capital also partnered with the Beijing Municipal Bureau of Financial Work to launch a RMB3 billion local currency outbound PE fund, which deals are intended to be sourced in Europe, with a focus on technology, market-access and other branded targets.
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