Archana Narayanan
Sun, Jun 2, 2024
(Bloomberg) -- A wave of Chinese banks, asset managers and hedge funds are ramping up in the Middle East, jostling with Wall Street firms who are making their own expansion push in a region flush with oil wealth.
Those efforts were on show in recent months, when a string of executives from China’s $1.35 trillion sovereign wealth fund made their way to the Middle East in the hope of finding a way to invest in the region.
Following a series of meetings with the region’s biggest alternative asset manager, the firms unveiled a first-of-its-kind $1 billion private equity fund and China Investment Corp. vowed to take an unusually hands-on role in scouting for deal targets.
That agreement comes at a time when Beijing’s soft-power has been on the increase in the Middle East — in recent days President Xi Jinping met Gulf leaders at a forum held in the Asian country. All that’s happening even as the US deepens its own Middle East push, while also scrutinizing growing ties between the region and China.
“The Gulf region was not always on the radar in the past decades for Chinese investors because they had really a lot of businesses going on with Europe and the US,” said China Merchants Bank International’s Chief Representative for the Middle East, Stephanie Holzhaider. The Middle East will see “big development for the next decade or two. That’s why Chinese companies are deploying with full force to set up their branches or offices to try to deepen presence in the market.” The firm recently set up an outpost in Dubai.
One big reason for the change is a slowing local economy in China, where firms are battling rising competition and waning consumption. The slump has been particularly acute in fields like technology and construction.
Meanwhile, Middle Eastern governments are plowing in billions of dollars to upgrade their infrastructure, offering Chinese companies and financial institutions new avenues for growth.
Full Operations
Analysts at HSBC predict that annual two-way foreign direct investment flows between Asia and the Middle East will reach $36 billion by 2035 from around $21 billion last year.
Chinese banks are now considering full service operations in the Gulf, rather than the small branches they’ve traditionally had. China Merchants Bank International started operations in Dubai’s financial center in April and it’s parent CMB Group will soon have both commercial and investment banking operations in the region.
Beijing’s state-owned China International Capital Corp has also ramped up in the Middle East in recent months, and hopes to give Middle Eastern investors more insight into China to encourage investment flows to the Asian country.
“We know that understanding China in a granular way is not easy to achieve without a presence in China or access to true China specialist institutions,” said Richad Soundardjee, regional managing director at CICC. “This has kept a number of investors in this region on the fence about adding China to their geographical mix.”
For more, read: Middle Eastern Wealth Flows to China Amid Anxiety About US Ties
Others building up a presence in the Gulf include Noah Holdings, one of China’s top wealth managers, which expects to get a business license in Dubai by the end of this year. Hong Kong’s Landmark Family Office is planning to set up an office in the emirate in the coming months.
Meanwhile, Infini Capital recently became the first Asian hedge fund to set up in the United Arab Emirates, joining peers from Europe and the US that have flocked to the country over the past few years.
Investment Destinations
To be sure, the US continues to be the among the most important investment destinations for the Middle East. Still, the region has been inching deeper into Bejing’s orbit — the UAE and Saudi Arabia are now part of the BRICS group.
The growing ties have already raised concerns in the US. Authorities there have boosted scrutiny of Middle Eastern wealth funds as part of a broader pushback on entities perceived to have close ties with Beijing, Bloomberg News reported last year.
Middle Eastern governments want “freedom to select their trade, tech, and security partners,” said analysts at Spain-based Sovereign Wealth Research at the IE University’s Center for the Governance of Change. But the Chinese expansion into the Gulf is at an early stage and the impact on US firms remains to be seen, they said.
Indeed, some of the sectors where Chinese firms are looking to invest in the Middle East are particularly sensitive from Washington’s perspective. Saudi Arabia and other Gulf countries like the United Arab Emirates have long been some of Washington’s closest partners in the region, particularly in defense.
US officials have balked at the possibility of the Gulf nations forging closer ties with China in high-end technology and artificial intelligence. Middle East firms have taken steps to assuage those fears: For instance, Abu Dhabi’s top AI firm G42 — backed by an influential royal — agreed to divest from China and pivot to American technology. The Emirati firm has since inked at least two deals with Microsoft Corp.
Still, Gulf states are prioritizing relationships that are likely to serve their national economic visions. Attracting foreign direct investment is a key priority for Saudi Arabia and officials in Riyadh describe China as an indispensable partner for Vision 2030 — Crown Prince Mohammed bin Salman’s multi-trillion-dollar economic and social transformation plan.
In recent days, Saudi Arabia has agreed to invest $2 billion in Lenovo Group Ltd., with the Chinese computer-maker pledging to open a manufacturing facility and establish regional headquarters in Saudi Arabia in return.
For Gulf countries, partnering with Chinese firms who can bring know how and technology in both traditional and new economy sectors, “creates a clear win-win opportunity for both sides,” said CICC’s Soundarjee.
Bloomberg Businessweek
China’s CNGR Looks to Snap Up More Lithium Projects in Argentina
Yvonne Yue Li and Annie Lee
Sun, Jun 2, 2024
(Bloomberg) -- CNGR Advanced Material Co., a Chinese battery-component maker and Tesla Inc. supplier, is looking to buy major stakes in Argentina brine deposits to extend its foray into the lithium-rich region as it builds its own supply chain outside the Asian nation.
Senior CNGR executives visited at least three deposits in Argentina last week, according to people familiar with the matter. Those include the Jama project in Jujuy province and the Rincon project in Salta province, said one of the people, who asked not to be named as the information isn’t public.
CNGR is building an upstream lithium supply chain to serve customers in the western world, just as the US and allies are stepping up efforts to decouple from China’s global dominance over battery metals. The firm partnered with African private investment fund Al Mada in September to build an industrial base in Morocco and bought a 90% stake in Lithium Energy Ltd.’s Solaroz Lithium brine project in Argentina for $63 million in April.
The structure of CNGR’s investment will be similar to the one it made in April, according to the people. CNGR declined to comment when contacted by phone.
Prices of lithium — a key metal in electric-vehicle batteries — have fallen more than 80% from a late-2022 record as the market whipsawed from shortage fears to a supply glut. That has happened amid a growing backlash against EVs in some markets. Lithium’s collapse is creating havoc among producers, with stalled projects, scrapped deals and output cuts. Still, analysts have said low prices may create opportunities for acquisitions.
Argentina has the world’s third-largest lithium reserves after Chile and Australia, but the country has long struggled to lure the consistent, hefty international capital flows needed for mass development of oil, natural gas, gold and silver locked underground.
On the Wire
China’s manufacturing activity expanded at the fastest rate in almost two years in May, according to a private survey, contrasting with weak official data that dented the country’s growth outlook.
Australia has ordered Chinese-linked Yuxiao Fund and its associates to sell their stakes in rare earths miner Northern Minerals Ltd., part of an effort by US allies to counter the Asian nation’s dominance of critical minerals.
China’s shrinking CO2 emissions — evident in their 3% March decline — suggest policymakers are getting tougher on fossil fuel use as they push toward 2030’s climate goals.
IXM’s co-head of refined-metals trading is leaving the company, the latest in a series of personnel changes at the trading house owned by Chinese miner CMOC Group.
Sun, Jun 2, 2024
(Bloomberg) -- CNGR Advanced Material Co., a Chinese battery-component maker and Tesla Inc. supplier, is looking to buy major stakes in Argentina brine deposits to extend its foray into the lithium-rich region as it builds its own supply chain outside the Asian nation.
Senior CNGR executives visited at least three deposits in Argentina last week, according to people familiar with the matter. Those include the Jama project in Jujuy province and the Rincon project in Salta province, said one of the people, who asked not to be named as the information isn’t public.
CNGR is building an upstream lithium supply chain to serve customers in the western world, just as the US and allies are stepping up efforts to decouple from China’s global dominance over battery metals. The firm partnered with African private investment fund Al Mada in September to build an industrial base in Morocco and bought a 90% stake in Lithium Energy Ltd.’s Solaroz Lithium brine project in Argentina for $63 million in April.
The structure of CNGR’s investment will be similar to the one it made in April, according to the people. CNGR declined to comment when contacted by phone.
Prices of lithium — a key metal in electric-vehicle batteries — have fallen more than 80% from a late-2022 record as the market whipsawed from shortage fears to a supply glut. That has happened amid a growing backlash against EVs in some markets. Lithium’s collapse is creating havoc among producers, with stalled projects, scrapped deals and output cuts. Still, analysts have said low prices may create opportunities for acquisitions.
Argentina has the world’s third-largest lithium reserves after Chile and Australia, but the country has long struggled to lure the consistent, hefty international capital flows needed for mass development of oil, natural gas, gold and silver locked underground.
On the Wire
China’s manufacturing activity expanded at the fastest rate in almost two years in May, according to a private survey, contrasting with weak official data that dented the country’s growth outlook.
Australia has ordered Chinese-linked Yuxiao Fund and its associates to sell their stakes in rare earths miner Northern Minerals Ltd., part of an effort by US allies to counter the Asian nation’s dominance of critical minerals.
China’s shrinking CO2 emissions — evident in their 3% March decline — suggest policymakers are getting tougher on fossil fuel use as they push toward 2030’s climate goals.
IXM’s co-head of refined-metals trading is leaving the company, the latest in a series of personnel changes at the trading house owned by Chinese miner CMOC Group.
Bloomberg Businessweek
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