HSBC and Chinese sovereign wealth fund prepare to make £1 billion bet on British companies

  • Britain and China have been trying to create closer financial ties
  • Fund will invest in UK companies with ties to China
PUBLISHED : Friday, 16 November, 2018, 12:46pm
UPDATED : Tuesday, 20 November, 2018, 3:12pm

The sovereign wealth fund China Investment Corporation and HSBC are reportedly in talks to raise up to £1 billion (US$1.27 billion) to invest in British companies.

The bank said that CIC was in discussions to create the fund focused on companies with ties to China, but did not confirm the amount. The Financial Times, citing sources, reported on Thursday that the fund could raise as much as £1 billion.

HSBC, CIC and the British private equity firm Charterhouse Capital Partners are in “exclusive discussions to create a fund to invest in high-quality and growing UK companies with development opportunities in China”,‎ the bank said in a statement.

The discussions come as the UK and China have been looking to forge closer financial ties, particularly as Britain prepares to exit the European Union and strike its own trade deals around the world.

In February, British Prime Minister Theresa May announced deals worth £9.3 billion to create more than 2,500 jobs in the UK following a three-day trade summit in Beijing.

Foreign direct investment into China from the UK has jumped 176 per cent in the first 10 months of this year, according to the most recent data from the Ministry of Commerce released on Thursday.

The deal is an important one for HSBC as it looks to be a premier foreign bank operating in China under John Flint, who was named the bank’s chief executive in February.

The bank, which is based in London, but generates more than half of its revenue in Asia, has pivoted to Asia in recent years and sees China as an important growth area as the country’s financial system further opens up.

HSBC CEO Flint says bulk of the group’s planned US$15-17b investment targeted at Asia

CIC did not immediately respond to a request for comment on Friday.

The sovereign wealth fund, based in Beijing, was founded in 2007 to diversify the nation’s foreign exchange holdings. The fund had total assets of US$941.1 billion at the end of 2017.

CIC has made similar moves to invest in companies in the US and Japan.

In 2017, Goldman Sachs and CIC announced plans to establish a US$5 billion fund to invest in American companies in the manufacturing, industrial, consumer and health care industries that have ties or could develop links to China.

The Ireland Strategic Investment Fund and CIC said in March they planned to create a 150 million (US$170 million) fund to invest in Irish technology firms seeking to access the Chinese market and Chinese firms that hope to use Ireland as a base for their European operations.

In October, Nomura Holdings signed a memorandum of understanding with CIC and several Japanese financial companies, including Daiwa Securities and Mitsubishi UFJ Financial Group, to create a Japan-China industrial cooperation fund.