Over the past weeks, illustrating the growing ties between the two countries in the field of innovation, several Russian state-owned funds and banks have signed agreements with Chinese counterparts. The combined amounts of these programs, which are partly dedicated to high-tech projects, may exceed $12 billion.
VEB-Harbin Bank
The first of these partnerships, which was inked in mid-June in Harbin, China, at the Fourth Russia-China Expo, involves Vnesheconombank (VEB), a major Russian bank founded in 1924, and Chinese Harbin Bank.
The two parties signed a memorandum of understanding and a framework agreement to launch a group of funds with a total target amount of $700 million to support innovative projects.
These Russian-Chinese funds will aim to stimulate R&D in the industrial sector, support high tech export, and promote bilateral trade and economic cooperation, according to VEB.
Their fields of intervention include industrial technologies, software, Internet, digital multimedia, e-commerce, communications and semiconductors, VEB’s head Sergey Gorkov told RIA Novosti.
Harbin Bank-SBT Venture
In a separate move, Harbin Bank also agreed last month to join Sberbank’s second corporate venture fund SBT Venture Fund II, investing in it up to $50 million.
While the Chinese bank is eyeing Russian fast-growing tech companies, SBT Venture Fund II seeks to co-invest in Chinese tech companies, thanks to this partnership with Harbin Bank.
SBT Venture Capital’s second fund launched in late 2016, four years after the creation of the first one. Both funds, which are managed by MoneyTime Ventures, have invested essentially in Western countries so far.
China Development Bank-VEB
VEB announced a framework agreement with another Chinese bank, the China Development Bank (CDB). This major government-backed bank, created in 1994, intends to inject up to $850 million in Russian innovative projects over the next 15 years.
“The purpose of this agreement is to support high tech and innovative projects, including those being developed in the framework of Russia’s National Technology Initiative [a long-term government program to support Russia’s leadership ambitions in the global high tech markets over the next 15-20 years],” Vnesheconombank’s chairman Sergey Gorkov commented in an exchange with RIA Novosti.
“We have a strong interest in projects implemented in Russia with a Chinese factor,” he said.
Various financial instruments, including participation in private equity funds and buying out of bond issues, will be used to support innovation in such traditional sectors as energy and infrastructure, as well as in such advanced fields as Blockchain projects, quantum technologies, neural technologies, and biotechnologies, Gorokov added.
“Funds may be used to support projects in such sectors as energy, transportation, industrial and energy infrastructure, as well as in cross-border projects in Siberia and the Russian Far East,” he added.
The Chinese bank and Vnesheconombank have been partners on the Asian markets for more than a decade.
In early June, VEB also signed a memorandum of understanding with India’s SREI Infrastructure Finance Ltd (SIFL). The two organizations aim to invest in Russian IT and innovation through a joint fund with a total target amount of up to $200 million.
China Development Bank-RDIF
On July 4, CDB agreed with RDIF, Russia’s sovereign fund, to create the China-Russia RMB Investment Cooperation Fund, which would invest up to $10 billion in Russian and Chinese projects.
These include projects related to China’s ‘One Belt One Road’ — an economic development strategy which includes the ‘Silk Road Economic Belt’ and the ’21st Century Maritime Silk Road’ across Eurasia — and the Eurasian Economic Union.
In Russia, the initiative will be implemented by the Russia-China Investment Fund (RCIF), which was created by RDIF jointly with China Investment Corporation (CIC) in 2012. In China, CDB’s subsidiary China Development Bank Capital (CDBC) will supervise the project.
Meanwhile, the RCIF and the Chinese province Hainan agreed to jointly inject over $500 million to support the ‘One Belt One Road’ initiative and bilateral investment cooperation between the two countries.
The funding will be used to fuel the development of industrial and innovative parks, high-tech healthcare services, tourism and social infrastructure, as well as culture and art in both countries.
A series of initiatives
These agreements are last in a series of bilateral investment vehicles to boost cooperation between Russia and China in the field of high technologies:
- In November last year, RCIF agreed with Chinese TUS Holdings to establish a joint Russia-China Venture Fund (RCVF) to invest “up to $100 million” in the development of trade and economic, investment, scientific and technological cooperation between the two countries. Among the fund’s targets are Russian tech companies, including startups, with a potential for further development in the Chinese market.
- In June 2016 Rostec and China CYTS Industrial Development, announced a fund with “an initial $4 billion target” to develop projects related to China’s ‘One Belt One Road.’ Under plans, a part of the fund’s resources will be used to fuel jointly-approved Russian IT and other high-tech projects.
- Almost simultaneously, RDIF agreed on a partnership with several Russian and Chinese industry players to develop and manufacture medical robots.
- In January 2016, Rusnano, Russia’s national nanotech investment corporation, and Zhongrong International Trust, a major Chinese investment and banking corporation, agreed to launch a joint $500 million fund in the field of nanotechnologies.
Private funds are also developing partnerships. In March 2016, the Russian conglomerate Sistema was reported to be in the process of creating a venture fund in partnership with China’s TUS Holdings. This fund’s capital was not to exceed $100 million at the start, with the Chinese side contributing 70% of this amount.
Just weeks ago Kapinvest 21, a Siberian venture firm, announced a partnership with Chinese investors to launch cryptocurrency-based fund.
A potential for cooperation between the two countries in the field of high technologies does exist — not only for large companies but also, at least theoretically, for small and medium-sized enterprises, according to a recent report.
Sources: Vnesheconombank (1, 2, 3), RIA Novosti, Sberbank, RDIF (1, 2), EWDN.
