Chinese investors' awareness of Russia is improving significantly; trading volumes are increasing, but the there’s still potential for volumes to be higher
This year is one of the “peak years” for overseas Chinese mergers and acquisitions, however, the proportion of deals with Russian participation is still small. "We have seen that the volume of transactions between China and Russia is expanding, but it’s still not as much as there is a potential for it to be. Over the past few years, the level of investor education has improved greatly, and we think it is time for China to invest in Russia,” said Riccardo Orcel, Deputy CEO of VTB Group and Head of VTB International.
Riccardo Orcel made these remarks on June 1 during an exclusive interview with Caixin at the St. Petersburg International Economic Forum in Saint Petersburg, Russia.
In recent years, when the Chinese and Russian leaders met, the two countries together announced some large-scale transactions. In the view of Riccardo Orcel, China's investment in Russia has room for growth, “because we started from quite a low level, even though the investment flows are increasing, factually the volumes aren't as high, but there's a potential for growth”.
Riccardo Orcel said that Russia is currently full of investment opportunities, with vast territory, many industries, on the one hand, and attractive current valuations of Russian companies and stabilization of the ruble, which makes investors feel more comfortable and confident about Russian economy.
“Natural resources, agricultural industries are very attractive, we have seen some potential Chinese investors looking at firms in these sectors. In addition, the infrastructure industry is also full of opportunities, there is a high demand for in the Russian airport infrastructure”.
In Riccardo Orcel’s view, for most Chinese investors, Russia has only been a “big neighbor” in the past, and Chinese investors lack the experience of doing business with Russia. However, in recent years, with the substantial improvement in investor education, investors began to better understand Russia and how the companies function not only in SOEs, but also in private companies.
“Investors in China are increasingly comfortable with investing in Russia as they start having a better understand of it, so I think it’s time to see the investments from China to increase.”
Riccardo Orcel argues that, in fact, Chinese companies are not radical, they like to be co-investors. If the management team is very good, they tend to keep it unchanged. In fact, they are very friendly investors.
VTB is Russia's second largest bank and has international presence. Currently, in Asia VTB Capital has offices in Singapore and Hong Kong, and VTB has a branch in Shanghai.