From the country that have been actively and productively absorbing international direct investment over the past three decades, China has become the world's largest investor.
The accumulated direct investment from China to other countries at the end of 2012 amounted to $532 billion. From which the amount to Russia, according to investment boutique specializing in China – Caderus, is a little more than $5 billion – less than 1% of the total amount. However, annual investment in 2012, by estimate of Caderus, already reached 1.7% of the total flow from China, i.e. the share of Russia could start to grow. 2013 already promises to be much more effective in this regard.
After the intensification of contacts at the highest level between Russia and China over the past few years, as well as in connection with a $2 billion joint fund by RDIF (Russian Direct Investment Fund) and CIC (China Investment Corporation), we saw a sharp increase in direct investment from China ($425 million for 5% of Polyus Gold, $2 billion for 12.5% of Uralkali, $187 million for 4.58% of MICEX, as well as numerous agreements on credit and joint financing of new projects in Russia).
Cooperation in the field of portfolio investment between Russia and China is unable to produce such record by now.
None ETF of shares or indices of another country is traded at the stock exchanges of Moscow and Shanghai with the fact that there are over 43 ETFs actively traded on Shanghai Stock Exchange are actively over 43 ETFs, including international ones. There are no managed trust funds in Russia and China with focus on investing in stocks or bonds of another country.
Moreover, among more than $9 billion invested by Chinese private investors in 72 local funds with QDII license for investment abroad, not a single dollar is designed specifically for Russian financial instruments.
Nevertheless, Chinese capital managers are beginning to look to the Russian market, and some management companies have already begun to cautiously invest in Russian shares traded in the form of GDR in London, as found by Caderus after it conducted its own study of the Chinese capital management market during the summer of 2013.
The survey of Chinese investment managers shows, in particular, that the accelerated liberalization of the capital market regulation in China, together with new opportunities for investment means a constant strengthening of competition in the capital management market. This is forcing asset managers to continually offer to their numerous and wealthy retail clients with innovative products, new ideas and new markets.
Therefore, the rapprochement and cooperation of professional financiers of Russia and China is inevitable, despite the numerous difficulties on both sides: expertise and experts are really not enough; linguistic barrier is at a very high level; capitalization and liquidity of the Russian market are inadequate; macroeconomic background and trends are not impressive as desired; negative news and stereotypes complement each other.
Negative history is also enough: many managers remember the default of 1998, and even more the sudden closure of Cherkizovskiy Market and the related losses of the Chinese investors: at the time these events were widely covered by Chinese media.
However, the survey and numerous personal meetings with Chinese investment managers, investors, financiers show that the Russian market is starting to generate interest in the first place with the help of price levels, dividend yield, its “newness” for Chinese private investors from a marketing point of view.
However, a sharp growth of interest and the associated flow of portfolio investment from China is most likely to happen in the case of adoption and consistent implementation of a programme on structural reforms in the Russian economy. This subject was the most frequently asked by the Chinese capital managers.