Russia-China strengthen agricultural ties with $2bn fund, free trade zone

The Russian and Chinese governments are stepping up their co-operation in the agriculture sector with the launch of a new $2 billion agricultural investment fund and an agreement to create an experimental free trade zone for agricultural produce in the bordering province of Heilongjiang, China’s largest grain-producing province.

The state Russian Direct Investment Fund (RDIF) and the Russia-China Investment Fund (RCIF), a private equity fund created by RDIF and China’s sovereign wealth fund China Investment Corporation, will be responsible for creating the fund and will seek to attract capital commitments from “major international institutional investors”, an RDIF spokesperson told Agri Investor. The management structure has yet to be defined, she added.

The fund will focus on projects producing cereal crops, namely rice and corn, along the borders of China and Russia, although its remit is not limited to that region, according to the spokesperson.

Heilongjiang, which represents 10 percent of China’s arable land, is known for using advanced agricultural production technology and for producing the highest-quality rice in China, creating significant export potential to the Asia-Pacific region, the spokesperson said. It also presents an opportunity for Russian producers to pick up good farming practices and technological knowledge; rice yields in Heilongjiang Province are approximately double the average in Russia.

“Heilongjiang’s experience and expertise in this sector will significantly increase the efficiency of our joint projects and expand potential opportunities for Russian producers in the Far East,” said Kirill Dmitriev, chief executive of RDIF and co-chief executive of RCIF, in a statement.

The experimental free trade zone will use a direct exchange rate between the rouble and the yuan, and will “support the implementation of incentives for Russian and Chinese high-tech agricultural businesses”, according to a press release.

The agreement to increase co-operation across farming, land management, customs procedures, food logistics and sales was signed during a recent state visit to Russia by Chinese President Xi Jinping.

Russia has focused on reducing its reliance on food imports and last year RDIF intensified its focus on agribusiness after investing a third of its $10 billion portfolio into infrastructure. RDIF is focused on improving harvest yields in the country through technology and better farming practices, Sean Glodek, director at RDIF, told Agri Investor in June.