South China Morning Post | 29 April, 2014
China state investor shifts sights to agribusiness worldwide
by George Chen and Jeanny Yu
Agriculture-related businesses worldwide, from farms in South America to dairy factories in the Netherlands, may soon find themselves in the sights of a new mega investor – China Investment Corp.
The mainland’s US$480 billion sovereign wealth fund is seeking to diversify its portfolio after it encountered hurdles while attempting to invest in other sectors, including real estate and technology, sources said.
CIC has been reviewing opportunities this year to invest in agriculture-related businesses, a field in which it has shown less interest in the past, people with a working relationship with the Beijing-headquartered firm told the South China Morning Post.
Since CIC was founded in 2007, it has favoured blue-chip stocks, fixed-income assets and infrastructure and utilities businesses in Western countries.
In some of the ongoing negotiations, CIC is looking to acquire large farms overseas or to expand those farms with local partners, said the people, who declined to be named as the discussions remained private and confidential.
The fund became more interested in agriculture after it was discouraged from investing in other sectors, such as real estate and technology, the people said.
CIC looked at many potential property deals, in particular in London, Paris and New York, where real estate prices had recovered strongly after the 2008 global financial crisis. Some of those deals were referred to CIC by global private equity firms – including Blackstone – the real estate funds of which count CIC as an investor.
However, high property valuations in major international cities deterred CIC from making any quick decisions to fork out its cash, the people said.
More recently, they said, CIC sent a team of specialists to Japan to examine some high-end properties in Tokyo, but they decided to walk away because of the high prices.
Meanwhile, CIC has been increasingly concerned about the feasibility of making major investments in the technology sector, in particular in the United States, owing to Washington’s distrust of Beijing.
US lawmakers have often accused Chinese state-owned technology giants, including Huawei and ZTE, of stealing intellectual property from US firms to use in their products, which could help Beijing spy on foreign countries. Huawei and ZTE have repeatedly denied those allegations.
Li Xiaopeng, head of CIC’s supervisory board, said at a forum in Hong Kong late last month that the investment environment had become more difficult for big funds like CIC, because many institutional investors were competing for the same type of longer-term investments.
One of the sources familiar with CIC suggested that the background of the fund’s new boss, Ding Xuedong, might have something to do with why the firm was now focusing more on agricultural businesses.
Ding, 54, was named chairman about a year ago. As one of China’s vice-ministers of finance between 2008 and 2010, he was mainly in charge of matters related to agricultural finance.
China is no stranger to global agricultural business. Cofco, the country’s largest grain trader, agreed recently to pay an initial US$1.5 billion for 51 per cent of Noble Group’s agricultural products trading unit. Last year, meat processor Shuanghui International, soon to list in Hong Kong as WH Group, acquired US hog producer Smithfield Foods for US$4.7 billion.
“The Cofco-Noble deal could be just the start of a new wave of investments from China in all kinds of agricultural business worldwide,” one of the sources said. “CIC has also shown interest in teaming up with state-owned enterprises to jointly invest in agricultural businesses.
“Money should not be a problem for the Chinese firms hoping to invest in the sector overseas, as now they have CIC, one of the largest sovereign wealth funds in the world, to back them, as long as they can find the right business opportunities.”
President Xi Jinping’s recent visit to Europe, widely considered successful in strengthening mutual trust between Europe and China, could help CIC speed up its efforts to invest in European farms and agribusinesses.
Capital-hungry and agriculture-rich South America is another potential major investment destination for the fund, the sources said.
When he was a vice-minister of finance, CIC chairman Ding Xuedong was mainly in charge of agricultural finance. (Photo: Reuters)
China state investor shifts sights to agribusiness worldwide
by George Chen and Jeanny Yu
Agriculture-related businesses worldwide, from farms in South America to dairy factories in the Netherlands, may soon find themselves in the sights of a new mega investor – China Investment Corp.
The mainland’s US$480 billion sovereign wealth fund is seeking to diversify its portfolio after it encountered hurdles while attempting to invest in other sectors, including real estate and technology, sources said.
CIC has been reviewing opportunities this year to invest in agriculture-related businesses, a field in which it has shown less interest in the past, people with a working relationship with the Beijing-headquartered firm told the South China Morning Post.
Since CIC was founded in 2007, it has favoured blue-chip stocks, fixed-income assets and infrastructure and utilities businesses in Western countries.
In some of the ongoing negotiations, CIC is looking to acquire large farms overseas or to expand those farms with local partners, said the people, who declined to be named as the discussions remained private and confidential.
The fund became more interested in agriculture after it was discouraged from investing in other sectors, such as real estate and technology, the people said.
CIC looked at many potential property deals, in particular in London, Paris and New York, where real estate prices had recovered strongly after the 2008 global financial crisis. Some of those deals were referred to CIC by global private equity firms – including Blackstone – the real estate funds of which count CIC as an investor.
However, high property valuations in major international cities deterred CIC from making any quick decisions to fork out its cash, the people said.
More recently, they said, CIC sent a team of specialists to Japan to examine some high-end properties in Tokyo, but they decided to walk away because of the high prices.
Meanwhile, CIC has been increasingly concerned about the feasibility of making major investments in the technology sector, in particular in the United States, owing to Washington’s distrust of Beijing.
US lawmakers have often accused Chinese state-owned technology giants, including Huawei and ZTE, of stealing intellectual property from US firms to use in their products, which could help Beijing spy on foreign countries. Huawei and ZTE have repeatedly denied those allegations.
Li Xiaopeng, head of CIC’s supervisory board, said at a forum in Hong Kong late last month that the investment environment had become more difficult for big funds like CIC, because many institutional investors were competing for the same type of longer-term investments.
One of the sources familiar with CIC suggested that the background of the fund’s new boss, Ding Xuedong, might have something to do with why the firm was now focusing more on agricultural businesses.
Ding, 54, was named chairman about a year ago. As one of China’s vice-ministers of finance between 2008 and 2010, he was mainly in charge of matters related to agricultural finance.
China is no stranger to global agricultural business. Cofco, the country’s largest grain trader, agreed recently to pay an initial US$1.5 billion for 51 per cent of Noble Group’s agricultural products trading unit. Last year, meat processor Shuanghui International, soon to list in Hong Kong as WH Group, acquired US hog producer Smithfield Foods for US$4.7 billion.
“The Cofco-Noble deal could be just the start of a new wave of investments from China in all kinds of agricultural business worldwide,” one of the sources said. “CIC has also shown interest in teaming up with state-owned enterprises to jointly invest in agricultural businesses.
“Money should not be a problem for the Chinese firms hoping to invest in the sector overseas, as now they have CIC, one of the largest sovereign wealth funds in the world, to back them, as long as they can find the right business opportunities.”
President Xi Jinping’s recent visit to Europe, widely considered successful in strengthening mutual trust between Europe and China, could help CIC speed up its efforts to invest in European farms and agribusinesses.
Capital-hungry and agriculture-rich South America is another potential major investment destination for the fund, the sources said.
