China set to plough up to $10 billion in Saudi Aramco’s IPO

China set to plough up to $10 billion in Saudi Aramco’s IPO
Written by:
Damian Wood
7th November 2019
Updated: 11th March 2020
  • China finalizes plans to invest in Aramco’s IPO
  • The state is said to be considering making a $10-billion investment in the state-owned oil company
  • Russia is also said to be planning to invest in the mega IPO
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Chinese government companies are considering investing up to $10 billion in Aramco’s IPO, following Saudi Arabia’s call for friendly nations to participate in the mega IPO that targets to raise up to $45 billion.

Beijing-based Silk Road Fund is said to be among the contenders interested in having a stake in the oil giant company, sources that sought anonymity said, further adding that other China-based fund companies are likely to come in.

With his “One Belt, One Road” initiative, President Xi Jinping has been keen on solidifying strategic trading partnerships, and the Aramco investment would certainly revive the ancient China-Saudi trading ties.

The sources also revealed that government-owned oil producer Sinopec Group and sovereign wealth fund China Investment Corp are at the forefront of investing in the Arabian oil company. The final stages of the investment deal are underway including making an initial commitment. Still, the Chinese government will need to decide on the exact amounts to be invested by each state-owned firm.

According to the Silk Fund website, the fund was set up in 2014 with an initial capital injection of $40 billion but was later boosted with an additional $100 billion.

If the Chinese government makes good of its plan to make an initial deposit, the Saudi government would make the listing a success after Western fund managers pushed back on Aramco’s valuation.

A report by Bloomberg highlighted how the Kingdom’s Crown Prince Mohammed Bin Salman wouldn’t settle for a valuation of less than $1.6 to $1.8 trillion having scaled it down from the initial $2 trillion valuation. Aramco wouldn’t comment on the matter.

The CIC and Silk Road Fund representatives were also contacted by Bloomberg but they too, would not disclose any tangible information regarding the planned investment. Other involved parties including the Finance Ministry and China’s State-owned Assets Supervision and Administration Commission also remained mum on the deal.

During a Bloomberg TV interview last week, the Chief Executive Officer of Russia’s Sovereign Fund Kirill Dmitriev said that Aramco’s IPO is a “unique opportunity” and that Russian investors are “keen to participate” in the deal. Other associates of the fund including the Russian Direct Investment Fund are also considering taking part in the oil investment, an official from RDIF told Bloomberg in response to an earlier query.

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