Chinese local governments are courting sovereign wealth funds from the Middle East and Asia as they struggle to raise money at home to boost economic development after the pandemic.
Local government officials have held high-level meetings with the Qatar Investment Authority, subsidiaries of the Saudi Public Investment Fund and the Abu Dhabi Investment Authority, according to wealth fund officials , business leaders and Chinese local government officials informed and involved in discussions.
Other Asian public investors, including Singapore’s GIC, have also launched approaches on the opportunities.
The encounters highlight deepening of economic and diplomatic relations between China and the Middle East, a region that has traditionally been a sphere of American influence. They also come as global investors try to secure liquidity from the Middle East, with Gulf countries teeming with petrodollars after last year’s oil boom.
“They [sovereign wealth funds] want to invest more in China and we need to attract more investors,” said a senior official in southern China. China. “It’s an easy adjustment.”
The cities of Shenzhen, Guangzhou and Chengdu as well as Sichuan Province and other local governments have set up funds this year to raise funds for investments in priority areas for Beijing, including semiconductors, biotechnology , new energies, high-tech manufacturing and infrastructure. .
Many are seeking international investment for the first time and have ambitious goals. The Guangzhou government wants to raise 200 billion Rmb ($29 billion). Shenzhen set up the first Middle East-China cooperation fund with the Saudi PIF in January, worth $1 billion.
The senior official said several local government officials, including Shenzhen and Guangzhou, have approached Middle Eastern funds in recent months to boost investment in biotechnology, new energy, and infrastructure and construction industries.
According to Zero2IPO, more than 2,000 government-controlled Chinese funds controlled 4.3 billion Rmb on the mainland as of October last year. Many of the new funds have struggled to raise private capital in the wake of the pandemic.
Traditional private funders have been unable or unwilling to support local industries and development, officials said. Many investors see them as too risky, they added. The central government has meanwhile indicated that it will no longer bail out local governments, which have been hit by zero-Covid policies and are under pressure from a liquidity crunch in the property sector.
“The financial situation of local governments has gotten so bad due to Covid controls and the economic downturn that we can’t even pay civil servants’ salaries,” said another official in China.
“How can we find the money to invest in local industries? But if the government doesn’t invest, this economy will continue to decline, so the willingness of sovereign wealth funds to invest is something we’ve never taken more seriously.
A western provincial official said he had traveled with companies in Saudi Arabia, Qatar and Singapore to talk to representatives of sovereign wealth funds interested in Chinese technology companies.
The QIA opened an office in Singapore in 2021 as part of an effort to increase exposure to Asian markets. The fund last year appointed a China manager based in Singapore.
“They used to invest mainly in big private equity institutions as limited partners, and now they are trying to invest directly in Chinese projects,” the Sichuan official said, adding that many projects were still under discussion. “Right now, on the tech side, they are still focusing on mature technology, and we hope to help local tech start-ups get new funding.”
The QIA, ADIA, PIF and GIC declined to comment. Local governments in Chengdu, Shenzhen and Guangzhou did not respond to requests for comment.
Additional reporting by Thomas Hale in Shanghai, Xinning Liu in Beijing and Andrew England in London
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