China state investor shifts sights to agribusiness worldwide
China Investment Corp shifts its sights to agribusiness worldwide after facing daunting hurdles in sectors including real estate and technology
George Chen and Jeanny Yu
Agricultural businesses from South American farms to Dutch dairies 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 encountering hurdles in sectors including real estate and technology, sources say.
CIC has been reviewing opportunities to invest in agriculture-related businesses, a field it had previously shown less interest in.
Since its founding in 2007, CIC has favoured blue-chip stocks, fixed-income assets and infrastructure and utilities businesses in the West.
In some of the ongoing negotiations, CIC was looking to buy large foreign farms or expand those farms with local partners, people with a working relationship with the corporation said.
The fund had become more interested in agriculture since being discouraged in other sectors, such as real estate and technology, the sources said.
CIC has eyed potential property deals in cities such as London, Paris and New York, where real estate prices have recovered strongly since the 2008 global financial crisis. Some of those deals were referred to CIC by global private equity firms, including Blackstone - the real estate fund that counts CIC among its investors.
But the high valuations deterred CIC from making any quick decisions, the sources 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, particularly 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 to use in products that 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 last month that the investment environment had become more difficult for big funds like CIC. Many institutional investors were competing for the same type of longer-term investments.
One of the sources suggested that the background of the fund's new boss, Ding Xuedong, might have something to do with why it was now focusing more on agriculture.
Ding, 54, was named chairman about a year ago. As one of China's deputy 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, recently agreed to pay US$1.5 billion for 51 per cent of Noble Group's agricultural products trading unit. Last year, meat processor Shuanghui International, which had planned 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 was another potential major investment destination for the fund, the sources said.