China's 12th Five-Year Plan (2011-2015) presents huge opportunities for Chinese and foreign investors, and UK-based RIT Capital Partners PLC plans to explore them, said Jacob Rothschild, RIT chairman.
Rothschild said he is getting his first fund ready to help Chinese companies expand overseas and bring foreign companies with advanced technologies to China.
Jacob Rothschild, RIT chairman
Regarding China's 12th Five-Year Plan, he said: "The country's leaders are intent upon switching the economic driver from export to domestic consumption and have included policies designed to develop emerging industries, which will become the backbone of China's economy in the decade ahead."
Rothschild, who is making his first visit to China, said he is interested in the seven industries mentioned in the document: biotechnology, new energy, high-end equipment manufacturing, clean-energy vehicles, new materials, next-generation IT, and energy conservation and environmental protection.
These industries "account for 3 percent of China's GDP, and the government is targeting a 15 percent share by 2020", he said.
"Achieving this target will of course require Chinese corporations within these sectors to expand overseas and succeed on a global scale."
There are also Western companies with clear strengths in healthcare, technology and energy, that want to come to China, he said, without naming which companies.
Rothschild said RIT is developing a joint venture to raise $750 million with the Chinese equity investment Creat Group and Beijing-based investment advisory boutique Quercus Ventures, in an advisory role.
RIT and Creat will commit $100 million seed capital to the fund. Other investors will come primarily from the China International Chamber of Commerce, whose members include Lenovo Group, Fosun International Ltd, Geely Automobile Holdings Ltd.
"We will take influential minority stakes in companies. In line with our investment philosophy, we will act as a supportive partner to management," Rothschild said.
The focus will be on investing in companies with top-line growth drivers that have the ability to produce predictable and stable cash flows in the future, he said, adding that use of leverage will be minimized.
Rothschild gave as an example green technology companies in the West that could bring advanced skills and build production facilities in China, where they can lower their cost and have access to the wide market.
Private equity (PE) and venture capital (VC) institutions are pursuing pre-float deals with high valuations in China. According to a report released by China Venture Group, a leading Chinese PE research agency, 214 Chinese enterprises listed at home and abroad in the first half of 2011, of which 100 had capital injections from PE or VC agencies.
Some companies with global operating experience have thought of differentiated strategies.
European-owned private equity firm A-Capital launched a euro fund dedicated to China-Europe cross-border investments and a yuan-denominated outbound fund for Chinese equity investments in Europe.
