03:37 GMT01 December 2020
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    The Russian Direct Investment Fund (RDIF) and China Construction Bank, one of China's 'big four' banks, are looking to use a new mechanism of partial credit guarantees to attract $20-25 billion in Chinese investment to Russia over the next 2-3 years, Russian media reported.

    Speaking to Russian business newspaper Vedemosti, RDIF CEO Kirill Dmitriev stated that the agreement would be signed during Russian President Vladimir Putin's meeting with Chinese President Xi Jinping, which took place earlier today in Moscow.

    "Our goal is to sharply increase loans to Chinese banks," Dmitriev noted. "At present Chinese banks are very conservative in their approach [to the Russian market]. We have developed a mechanism of joint investments in debt instruments, where we will take more risk onto the RDIF, the Russia-Chinese Investment Fund or in cooperation with our partners in the Middle East, but will receive greater returns in exchange." Overall, the RDIF and its partners have plans to contribute roughly $1.5 billion to the initiative.

    "For example, in a $1.5bn loan, we would take on a $200m mezzanine tranche with a higher interest rate, and overall the loan would have a blended interest rate attractive to the Russian company," Dmitriev explained.

    The initiative to attract Chinese investment is meant as an alternative source of financing to Western capital funds, which have raised their rates and restricted Russian borrowing over the past year.

    Dmitriev stated that five prospective borrowers have already signed up, including leading firms in the areas of petrochemicals and metallurgy. "These are reliable borrowers, seeking either to refinance their debt or to attract money for development projects. These are companies which have seen European banks raise their rates, hamper lending, and are interested in an expanded geography for the raising of investment funding."

    The businessman noted that while Chinese lenders are presently most interested in industrial export-oriented businesses, lending to Russian banks may be possible in the future.

    Dmitriev told Vedemosti that he expects up to ten loan deals to be closed by the end of the year.

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    Tags:
    foreign investment, funding, investment, agreement, China Construction Bank (CCB), Russian Direct Investment Fund, Vladimir Putin, Xi Jinping, Kirill Dmitriev, China, Russia
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