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Column by Damian Chunilal, CEO Asia for VTB Capital, for South China Morning Post

28 August 2013
Strategic partnership boosts Russia-China ties

August 28, 2013 Damian Chunilal, CEO Asia for VTB Capital
VTB Capital and CITIC Securities, one of China’s leading investment banks, are confident their recent strategic partnership will help Russian and Chinese investors build on existing opportunities across a range of investment banking activities.
The partnership will help with cross-border mergers and acquisitions and other financial advisory services. It underlines the importance of trade and investment relations between the two emerging market giants.
Relations are underscored by trade in energy and other resources between China’s northern provinces and Russia’s east. Russia’s abundant natural resources are helping to meet the substantial demand fr om China’s industrial base.
Energy links between the two countries have also grown over the years. The amount of electricity exported to China from Russia increased by 26 per cent last year and investment is being made into hydropower resources for the energy-hungry Chinese economy.
Russia’s energy company EN+ alone is capable of delivering up to 35GW of new capacity in the next 15 years, much of this through hydroelectric power.
Government-owned oil giant Rosneft also announced a deal last month to increase oil supplies to China in a 25-year deal for 300 barrels per day, including a substantial up-front payment of US$70 billion. Rosneft estimates the total value of the deal at US$270 billion.
Bilateral trade between the two nations has more than doubled in the last five years, reaching US$88 billion last year. The Russian Direct Investment Fund and China Investment Corporation established the US$2 billion Russia-China Investment Fund when President Vladimir Putin visited China in June last year.
However, a number of cyclical and structural headwinds do exist that may have an impact on prospects for emerging market growth. The IMF predicts China’s economy will grow by 7.75 per cent this year, slightly lower than earlier growth forecasts.
Meanwhile, VTB Capital has played an important role in helping to profile investment opportunities in Russia.
The bank’s international investment forum series – RUSSIA CALLING, which is held in New York, London and Moscow on an annual basis – is designed to highlight the opportunities for investors in Russia.
Russia’s economy has also performed well in recent years. GDP per capita in Russia is the highest among all the BRICS (Brazil, Russia, India, China and South Africa) countries, at US$17,698. This figure in 2000 was 5 per cent that of the GDP per capita in the United States, wh ereas today it is nearly one third.
VTB Capital has carved out a position as a leading emerging market investment bank that can support investors and companies looking to take advantage of cross-border opportunities in Russia.
This will only lead to new and exciting opportunities in the future for investors and business people.

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