Wednesday, September 6, 2017

Funding the China-CEE Relationship

In a May interview with GlobalCapital, Jiang Jianqing, head of the Sino-CEEF Holding Company and former Chairman of ICBC, sets out the SINO-CEEF’s aims. Read on for an edited excerpt. Prof. Jiang provides more details at the CEIBS 3rd Europe Forum in Warsaw on Sept 15.

What is the main aim of the SINO-CEEF Holding Company?
SINO-CEEF Holding Company Limited (SINO-CEEF) is an innovative platform initiated by China for financial collaboration under the cooperation mechanism between China and Central & Eastern European (CEE) countries. ICBC took the lead and established the platform. SINO-CEEF adheres to the principle of “government support, commercial operation and market orientation”, gathers advantages from China and CEE countries, and attracts Chinese and foreign partners to join the platform. It matches global capital with China's advantages, sets up a platform for industries and capital in the CEE region, and provides integrated financial solutions comprised of “private equity + investment banking + commercial banking”.

The CEE countries feature a stable political and policy environment, successful transition into a market economy, and relatively perfected legal and regulatory frameworks; but currently their cross-border direct investments and capital markets are still at an early stage of development. According to statistics from Invest Europe (European Private Equity and Venture Capital Association), the scale of private equity and venture capital investments in the CEE region in 2015 was only 1.6 billion euros, and the size of global funds raised for CEE as the main target region was less than 500 million euros. Meanwhile, the scale of Initial Public Offerings in the largest stock exchange in the CEE region in the first quarter of 2015 was 440 million euros, and its average daily turnover of secondary market was 210 million euros; these figures represent 0.2% and 0.1% of its total market capitalization, respectively. They show that the stock exchanges in the CEE region are characterized by limited financing ability and transaction activities. Lack of attention from international equity investors, difficulty in attracting equity capital into enterprises, and lack of interest in industrial investment opportunities constitute key issues restricting economic construction in CEE countries. But they also represent the potential of deepening cooperation between China and these countries.

Before the establishment of SINO-CEEF, we have taken into full account the characteristics and development demands of the region. We will treat equity investments as a breakthrough, innovate models of financial services, lead global investors to look at and focus on the CEE market, fully tap market potential, promote commercial exchanges between China and CEE countries, break the bottlenecks of regional development, and help to form a virtuous circle of market development and value creation.

Why is this project taking place now?

Globalization is the basic feature of our present era, and finance is its important component and internal driving force. Under the circumstances of global resource reallocation and in-depth economic structure adjustment, financial innovation as an “engine” will be a crucial element to accelerate the development of globalization and deepen regional cooperation.

Since the consensus on cooperation between China and CEE countries was reached in 2012, the two sides have made a series of major achievements, but there are still some problems and challenges. Therefore, China proposed an innovative financial services model during the “16+1” Summit held in Suzhou in 2015, which has gained support and responses from the 16 country governments. Based on this initiative, ICBC embarked on the establishment of the SINO-CEEF Holding Company Limited and the SINO-CEE Fund. In compliance with EU rules on trade and investment, SINO-CEEF will better help Chinese enterprises and funds to “go abroad”, and will support practical cooperation between China and CEE countries, as well as other western countries, by integrating strong manufacturing capacity and enormous market potentials with solid financial strength.

The “Belt and Road” Initiative has created a grand picture of cooperation between China and CEE countries, and the “16+1” cooperation mechanism has provided a platform for multilateral cooperation. The SINO-CEE Fund is strongly committed to realizing practical cooperation between China and CEE countries.



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