Recently, Shenzhen Bay ushered in a group of Middle Eastern guests - a UAE delegation led by Abdullah bin Touq Almari, UAE Cabinet member and Minister of Economy, and a group of more than ten people came to China’s local VC carrier SZVIC for investigation and exchange.

Previously, the team of Abu Dhabi sovereign wealth fund Mubadala Investment Company just visited SZV; and this year, Shenzhen also introduced Saudi Arabia sovereign fund for the first time; the latest news is that the Saudi Ministry of Investment (MISA) is mulling to open a Greater Bay Area office. At one time, the Middle East consortium intensively appeared in Shenzhen.

Not coincidentally, Mubadala’s Beijing office has just been officially unveiled, the investment world in the “20,000 billion, the Middle East tycoon came to Beijing” report mentioned that at present, the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the Qatar Investment Authority, the Saudi Arabia Public Investment Fund and other Middle East sovereign funds have set up offices in China.

So far, we see the Middle East consortium coincidentally intensive investment in China, which is a very historic scene.

SZCI, a group of Middle Eastern guests just arrived

Why SZV?

Here is a background: in recent years, the UAE is committed to the development of the new economy to boost the country’s economic growth, and as UAE Cabinet member and Minister of Economy Abdullah Bin Touk Almari revealed, they have formulated many preferential policies to attract new economy enterprises.

And SZV was founded in 1999 and is known as the king of local VCs - as of 31 July 2023, it has managed a total of 446.6 billion yuan of all kinds of funds and invested in 1,420 companies; the latest 260 invested companies are listed in 17 capital markets around the world, and the number of invested companies and listed companies ranks the industry’s The number of invested enterprises and listed enterprises ranks first in the industry. The investment community learnt that 9 portfolio companies of SZV participated in the exchange meeting together, which came from various fields such as financial technology, new energy, information technology, intelligent education and so on.

At the meeting, Ni Zemang, Chairman of SZCIC, said that many new economy enterprises and technology-based enterprises invested by SZCIC are very compatible with the economic development direction of the UAE. Abdullah bin Tuk Alma also believed that the enterprises participating in the conference were highly relevant to the key areas of concern of the UAE, which made them feel that “synergy can be formed with SZVIC’s business”.

Since the beginning of this year, SZVIC has been communicating more and more closely with the Middle East consortium. It is impressive that in February this year, Zuo Ding, President of SZCIC, led a delegation to the Middle East and visited Saudi Arabia, the United Arab Emirates and Kuwait successively. During the nearly 10-day journey, the delegation of SZCIC visited a number of well-known sovereign funds, trade unions and financial institutions.

Subsequently, a wave of Middle East consortiums came to SZVIC Plaza by the Shenzhen Bay - in April this year, a delegation led by Waleed Al Mokarrab Al Muhairi, Deputy Chief Executive Officer of Abu Dhabi Sovereign Wealth Fund Mubadala Investment Company Group, came to SZVIC.

On this visit, Waleed Al Mokarrab Al Muhairi made it clear that the UAE and China have a good foundation for increasingly close cooperation, and that Mubadala will continue to increase its investment in China in the future, and at the same time, endeavour to attract more Chinese enterprises to lay out in the UAE and the Middle East, and to promote the development of industries in the Middle East.

Behind a scene, Shenzhen is in full force. In January this year, Shenzhen Futian District and Saudi Arabia public investment fund cooperation, announced the first introduction of the Saudi Arabia sovereign fund, set up in the territory of the Blue Ocean Taikoo (Shenzhen) Private Equity Investment Fund Limited, the first fund size of more than 1 billion yuan, stationed in the Shenzhen Shamie Lake International Venture Capital Venture Capital Block.

In the latest news, the Deputy Minister of Saudi Arabia’s Ministry of Investment (MISA), Mr Sailor, has revealed his intention to open an office in the Greater Bay Area in order to strengthen his influence in southern China in support of “Saudi Vision 2030”. At the same time, he said he would like to see such offices in all major Chinese cities “to ensure that we remain connected to the whole of China”.

Data show that the Saudi Ministry of Investment was established in 2020, responsible for managing the investment environment in the Kingdom of Saudi Arabia, operating under the guidance of the Kingdom of Saudi Arabia’s Council for Economic Affairs and Development, to provide services and facilities for investors in order to improve the investment environment, and to promote the development of the local economy.

In other words, another Middle Eastern tycoon has begun to lay out China in depth.

Middle East Consortium

Lining up to set up offices in China

“I heard that a number of sovereign funds in the Middle East are coming to China to set up Office.” In recent times, such rumours have been circulating intensively in the primary market.

And the one that has caused a stir is the Mubadala China Office, which made its first official appearance a fortnight ago. The investment community learned that the office is located in the north tower of the Zhengda Centre in Chaoyang District, in the core area of Beijing CBD. Mubadala currently has a team of about 10 people in Beijing, responsible for direct and fund investments in China.

As the third largest sovereign wealth fund in the UAE, the direct leader behind Mubadala is the Crown Prince of Abu Dhabi. Since its inception in 2002, Mubadala has established an extensive presence in the global marketplace, with offices in New York, San Francisco, London, Beijing, Moscow and Rio de Janeiro, thus radiating investments in more than 50 countries around the world.

This time, Mubadala Investment Company’s Chinese website was launched. According to the official website, Mubadala’s latest management scale is more than $276 billion, or about 200 billion yuan, and it has already invested in more than 80 projects, with a portfolio that includes companies such as Qunar, BOSS Direct, Xiaopeng Automobile, and Novo Nordisk.

According to the Sovereign Wealth Fund Report 2023 published by Preqin, an alternative asset data and insights agency, Middle East sovereign wealth funds have assets under management of up to $3.7 trillion, accounting for 36 per cent of global sovereign wealth funds. Looking at the world’s top 10 sovereign wealth funds, the Middle East accounts for four of them, the jungle status is self-evident.

Among them, Abu Dhabi Investment Authority (ADIA) with $853 billion in assets under management, ranked No. 3 in the world. Abu Dhabi Investment Authority was founded in 1976, set up an office in Beijing in 2021, and at the same time built up a localised team, most of the front-office investors in the team are now professionals familiar with the Chinese market.

One of the most sensational investments, in fact, is Azera Motors. In June this year, CYVN Holdings, an organisation under the Abu Dhabi Investment Authority, made strategic investments totalling about $1.1 billion in Azalea. In addition, at the end of August, Platinum Peony B 2023 RSC Limited, another institution under the Abu Dhabi Investment Authority, subscribed for shares in consumer company Phoenix.

Earlier, the Kuwait Investment Authority (KIA) came to Beijing to open an office in 2011. Founded in 1953, KIA has a total asset size of over $800bn and is ranked 4th among global sovereign funds. In the Chinese market, in addition to the Beijing office, Kuwait Investment Authority opened a new office in Shanghai in 2018.

There is also the Qatar Investment Authority (QIA), which manages a total asset size of $475bn, also set up an office in Beijing back in 2014.

In addition, another active Middle Eastern sovereign fund is the Saudi Public Investment Fund (PIF), with total assets under management of $776.7bn.2022 In February, the Saudi Public Investment Fund opened an office in Hong Kong, China.

According to SWFI statistics, the Saudi public investment fund’s total equity investment in China in 2017-2021 was about $12.2 billion, accounting for 20 per cent of its total share of overseas equity investment, in which a familiar name appeared - Xiaohongshu, Homework Help, Keep, Guazi Used Cars and so on. In February this year, Hero Sports received $1.8bn in investment from PIF’s Savvy Games Group.

It can be seen that more and more Middle Eastern sovereign funds are setting up offices in China. The UAE’s G42 Expansion Fund, which was established just last year, has already set up an office in Shanghai this year without stopping, with Hu Ningfeng, formerly head of Jingdong’s strategic investment department, in charge.

The Middle East consortium is here, which means the money is coming too. Not long ago, Hong Kong Stock Exchange chief executive Au Guan Sheng said in public that “the investment capital of Middle Eastern sovereign funds is expected to increase to $10 trillion by 2030, when more than 10-20 per cent of the investment may go to China.” In other words, the Middle East will have about $1 trillion-$2 trillion invested here.

I’ll pay for the money, you pay for the technology

Explosive buying of China

Active Middle Eastern consortia are trenchant. I remember that in the beginning of 2023, a group of government agencies, investment companies and enterprises from China led teams to the Middle East, when China’s flights to and from Saudi Arabia, the United Arab Emirates and other Middle Eastern countries became busy.

Of course, the most shocking scene is still the Middle East tycoons bursting to buy China-

Data show that in the A-share listed companies 2023 half-yearly report, 89 companies in the top ten circulating shareholders have appeared in the figure of the sovereign wealth fund, there is no lack of Abu Dhabi Investment Authority, Kuwait Investment Authority and other Middle East forces. They appeared behind listed companies such as Yutong Bus, Dongfang Rainbow, Haida Group, Topband, Chao Hongji, Soyu Civilian, and Allied Rise Electronics.

In just over a month’s time, Saudi Aramco, the world’s largest oil company, has splashed out a total of more than 100 billion yuan to invest in China;

Meanwhile, Middle Eastern capital has appeared behind more and more familiar corporate names - Byte Jump, Azure Auto, SHEIN, Jingdong Industry, Hero Sports ……

The reason behind this is not difficult to understand. For a long time, Middle Eastern countries, relying on rich oil and gas resources, have been described as rich. Although it is a gift of nature, it is inevitable that the future survival is full of worries: once the oil is depleted, what to do? Therefore, the Middle East countries of economic diversification and transformation is imminent, and the stone of other mountains can attack jade, when the Middle East consortium on behalf of the government’s will to turn their attention to the world, China is an important stop.

As a common observation goes, “Chinese companies have the production capacity and technology that the Middle East needs right now, while the Middle East, with its wealth accumulated over the past decades, can provide the market and capital that Chinese companies demand.”

In June this year, the China-Arab Cooperation Forum was held in Riyadh, and China and Saudi Arabia signed more than 30 economic and investment cooperation agreements worth more than RMB 70 billion on the first day of the conference, covering a wide range of areas including technology, renewable energy, agriculture, real estate and minerals.

Sensitive VC/PE has long noticed this “hot money”. Since this year, to the Middle East to raise funds once became the domestic VC/PE standard. Especially when the U.S. mainstream U.S. dollar LP overall wait-and-see attitude, a large number of U.S. dollar fund partner-level leadership group flew to the Middle East. Even due to the rapid increase in the number of Chinese investors and various people travelling to the Middle East countries, local Chinese restaurants and five-star hotels were full for a time.

After combing, it is not difficult to find that the Middle East tycoons have obvious investment preferences, such as new energy, new materials, high-end manufacturing, new infrastructure, biomedicine, digital economy frontier industries. The rise of these invested companies not only allows the fund behind them to earn high returns, but also carries another expectation - to introduce emerging businesses to their home countries, driving local industrial transformation and upgrading.

Drawing on the investment promotion of governments around the country, the Middle East tycoons have also extended the olive branch. “For example, Saudi Arabia, the purpose is very clear - investment attraction, requiring the invested enterprises to build factories and put them into production first, to meet certain conditions, and then laddered to hit the money.” A VC investor in Shanghai introduced, “There are also Middle Eastern countries that want our investees to land subsidiaries, giving money generously.”

In any case, consortia from the Middle East are stirring up a pool of spring water. Perhaps a number of years back, this will be a new historical opportunity.