Igor Shuvalov, first deputy Prime Minister of Russia and Li Keqiang, executive vice-premier of the State Council of China, announced at the recent China-Russia Investment and Trade Forum that the two countries will be launching a joint Investment Fund in the summer of 2012. Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), said in a press release that the Russia-China Fund is expected to receive initial capital in the amount of $4 billion. The China Investment Corporation (CIC) and the RDIF are to contribute $1 billion each, and the remaining $2 billion will come from other Chinese institutional investors. The launch date of the Fund is planned for the end of June.
The Fund’s capital will be managed by a designated company, which is in the process of being established. The founders of the management company are the RDIF and the CIC. The former stakeholder will control 60 percent of ownership while the latter will take on 40 percent. Most key executives at the Fund management company will be nominated by the RDIF. The Russian investment corporation is also expected to take the lead on most of the project selection process, including overseeing project research, analysis and evaluation.
In terms of geographic location of the investments, as much as 70 percent of the Fund’s capital will be invested in projects and businesses in Russia and other Commonwealth of Independent States (CIS).
“The Russian economy might see hundreds of millions of dollars in joint investments from Russia and China as early as the end of 2012,” promised Dmitriev.
The remaining 30 percent will be allocated to Chinese businesses and projects that also have Russian involvement.
Investing in forestryand timber, engineering, transportation, agriculture and logistics are the sectors that top the list of investment priorities for the Fund. Dmitriev also noted that special attention will be paid to energy saving and energy efficiency initiatives.
For China, investing in forestry initiatives domestically can offer particularly appealing business opportunities. According to the latest Global Tree Farm Economics Reviewpublished by RISI, a US information provider for the global forest products industry,China’s imports of logs, lumber, woodchips and pulp hit record highs in 2011. At the same time the country’s timber supply deficit increased by more than 30 percent, reaching an estimated 152 million cubic metres.
In addition, the authors of the Review noted that increased forestry preservation efforts worldwide have led global timber markets to become overly dependent on man-made forestry plantations and tree farms. This means planted forestry is likely to enjoy increased attention from private and public decision makers in the foreseeable future.