China Everbright Ltd. plans to launch at least two private equity funds to invest in airports and infrastructure assets in Europe in response to Beijing’s “One Belt One Road” initiative.
Chen Shuang, China Everbright Ltd.'s chief executive officer, told reporters in Chongqing that plans to create a China-centred infrastructure network spanning more than 60 countries are propitious given his ambition to turn the Hong Kong-listed multi-asset manager into “China’s Blackstone.”
“The One Belt One Road strategy will create a lot of investment opportunities for us,” Chen said.
“As part of our 'going out' strategy, we have short-listed a few airport terminals and infrastructure projects in Europe as potential acquisition targets,” he said. “We plan to complete the acquisitions of overseas assets in three to five years and turn some of them into logistic hubs, providing a transit between China and Europe.”
China Everbright Ltd. is separately also planning to launch another fund of funds for making overseas investments in infrastructure projects. The fund of funds is expected to raise as much as Rmb10 billion ($1.6 billion), according to Chen, who declined to give any additional information about the likely size of investments or how he would raise the money.
One Belt One Road is a Chinese foreign policy initiative promoted by President Xi Jinping to redirect some of China’s excess industrial capacity and employ it for regional infrastructure development to help improve trade and relations with Asean, Central Asian, and European countries.
China has so far signed 12 free trade agreements with countries ranging from Singapore to Switzerland to help facilitate the expected cross-border trade and investment and a further eight are under negotiation, including with Japan and Korea, according to CLSA, a Hong Kong-based independent research company.
China’s main aim under One Belt One Road is to stimulate the domestic economy via exports from industries with major overcapacity such as steel, cement and aluminium.
The first idea is the construction of a Silk Road economic belt spreading from western and inland China through Central Asia towards Europe. The second idea – a 21 century maritime Silk Road – is inspired by maritime trading routes from coastal China through the South China Sea and beyond.
UBS expects mainland Chinese investment in One Belt One Road initiatives to double in the next three years, hitting a total of $200 billion. Chinese overseas direct investment into Europe hit $18 billion in 2014, double the 2013 level, according to a joint report by law firm Baker & McKenzie and Rhodium, a China-focused research group. Chinese investors have spent $12 billion in the region over the past four years.
AUMbition
Apart from its core business in private equity investing, China Everbright Ltd. also engages in fund management plus structured financing through mezzanine funds and aircraft leasing.
As of June this year, the company had managed 30 funds, with total assets under management of HK$51.7 billion, according to its interim results.
On the sidelines of the Chonqing briefing, Chen separately told FinanceAsia that the company aims to grow its AUM by 30% next year by leveraging its strong presence in the domestic China market.
China Everbright Ltd., controlled by the state-owned financial conglomerate China Everbright Group, has minority stakes in Shanghai-listed China Everbright Bank and Everbright Securities, which made its international bond market debut in August. It expects to sell these holdings to the parent company, although some analysts are sceptical that that can be done any time soon.
"A key catalyst would be selling shares of Everbright Bank back to the parent company," Arjan van Veen, an equity analyst at Credit Suisse wrote in a note to client. "However, this is unlikely in the near term, given the constraints on large shareholders selling their stakes under current CSRC market measures."
