Webinar: “Financial incentives for doing business with China” – October 1, 2020
October 7, 2020 Category Past events, Weekly
The Flanders-China Chamber of Commerce organized a webinar focused on Financial Incentives for Doing Business with China online on 1 October 2020.
Ms. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, introduced the webinar and the speakers.
Mr. Rik Daems, Senior Advisor International Investment Funds FPIM-SFPI, Vice Chairman and President of the Investment Supervisory Board, China-Belgium Direct Equity Investment Fund (CBDEIF) and President of the Parliamentary Assembly of the Council of Europe PACE-CDE, talked about the different investment vehicles for Belgian companies investing in China and Chinese companies investing in Belgium. He was speaking from the European Parliament in Strasbourg. The Federal Holding and Investment Co (SFPI-FPIM) is basically the Belgian sovereign wealth fund, managing the Belgian federal government’s shareholdings with a total balance sheet at the end of 2019 of over €2 billion and an additional €15 billion that they manage on behalf of the Belgian government. In the next months the SFPI will grow a lot bigger as the new Belgian government will put all its investments in the Fund.
The Fund was established in 2004 with about €100 million equity, which was doubled in 2013. Together with a sister fund, the total is now around €650 million. By mid-2020, the Fund had invested in more than 85 companies. The fund manager is a Shanghai-based joint venture between BNP Paribas Fortis Bank and Haitong Securities. In principle 15% of the initial capital is reserved for Belgian Related Projects (BRP) and this target has already been reached. For several years the Fund has been nominated as “one of the best PE funds in China” by Forbes China. The average rate of internal rate of return (IRR) is approximately 30%. The size of an investment is normally between €3 million and €8 million and the average share of equity is between 5% and 15%. The Fund is looking for companies that are already in a stage of development and have the potential to grow to become the first or the second one in the market.
The China Belgium Mirror Fund was established in 2012 between China Investment Corp (CIC) and SFPI and is fully invested and in divestment mode. It is not available for new investments.
Datang-SFPI Venture Capital Fund was established in 2012 by CICT – a merger between the Datang Group and Wuhai Fiberhome – to proceed with green investment and early-stage investments. The capital is CNY100 million, with CNY64 million still available. This fund is focussing on telecom investments in China.
Two other funds are the BMI-SBI Belgian Cooperation for International Investment, which besides equity investment also offers long-term finance. They have a great analysis capacity and can give you a first opinion about your investment project. BIO, Belgian Investment Co for Developing Countries, established in 2001, invested in more than 160 projects in 52 countries. It is focused on development aid but China is still classified as a developing country. BIO has an investment capacity of €600 million.
Mr. Steven Levecke, Senior Investment Manager, Capricorn Partners, presented the Capricorn Fusion China Fund aimed at building investment bridges between Europe and China. It started as the Asian-Europe Fusion Fund and has been rebranded as the Capricorn Fusion China Fund. Capricorn Partners is an independent manager of venture capital and equity funds that invest in minority shareholdings in innovative companies. It has a 27-year track record and about €400 million under management. It is also the independent advisor of the China-Belgium (Europe) Technology Innovative Industry Fund (China-Belgium Fund), a CN350 million fund set up at the end of 2019 by two Chinese investors to invest in European high-tech companies.
The Capricorn Fusion China Fund was initially set up by people linked to the Heylen Group, an industrial holding. The ambition of the Fund is to provide capital for transcontinental growth by offering a platform for successful innovative entrepreneurs allowing them to scale their business on another continent by selecting the right partners and applying smart capital. The Fund is not sector-specific. The target size of the Fund is around €75 million, aiming to make investments in 10 to 15 European or Chinese companies to build a balanced portfolio. Investments will range from a minimum €2 million to a maximum of €5 million. The idea is to have a meaningful minority stake. There are different trends creating opportunities for European companies in China: a growing middle class, strong urbanization, health tech, high-end manufacturing and so on. On the Chinese side, the Fund would like to invest in technology companies exploiting opportunities in Europe. One successful deal Capricorn was involved in was Punch Powertrain, an independent automotive supplier, which in 2010 was a struggling manufacturer of shiftless transmissions. Punch Powertrain was taken over by Yinyi Group in 2016 for €1 billion, giving an IRR of 60%. Finally, Mr. Levecke presented the Fund’s investment team and the investment committee and investment advisors. The Fund also has access to the network of Horsten International. Based on the work of Horsten, the Fund made its first investment in Xi’an Thiebaut, a Sino-Belgian joint venture specialized in the production of collapsible aluminum tubes. The Capricorn Fusion China Fund has bought Horsten International’s 6.6% share in Xi’an Thiebaut.
Contact: Steven Levecke, steven@capricorn.be
Mr. Tim Lievens, Senior Investment Manager PMV, introduced the Participatie Maatschappij Vlaanderen (PMV), the investment vehicle of the Flemish government to support mostly Flemish SMEs in their expansion, either organically or through acquisitions. PMV facilitates the growth and financing of those companies. The two pillars of PMV are financing for entrepreneurs and investments in infrastructure, real estate and renewable energy. PMV’s financing instruments are guarantees for traditional bank financing; senior unsecured loans; mezzanine loans; venture debt and equity.
In order to provide loans, banks require securities. Sometimes the securities the company can offer are not sufficient. PMV can provide the guarantee the banks need to finance a company’s international expansion. PMV can support different types of debt financing including investment credit; working capital facility; factoring facility; and leasing facility. PMV can also directly provide loans to companies. The focus is on mature companies with an experienced management, a track record of positive cash flows and a strong business plan. The loans are always flexible and non-dilutive to the capital structure. The third type of financing is equity investment, focussed on cleantech, ICT, creative industries, the circular economy, and life sciences & care. Investment is up to €20 million in a minority stake. PMV is looking for sound industrial fundamentals in a company. The repayment capacity is the single most important issue based on the business plan. PMV only invests in the Flemish headquarters of the company, but the money can be used to finance projects abroad. Biobest is an example of a company in PMV’s portfolio.
Contact: Tim Lievens, tim.lievens@pmv.eu
Mr. Wim Bosman, Business Development Specialist, Marketing and Communication, Credendo, introduced the traditional export credit agency of Belgium with almost 100 years of expertise in trade credit insurance. It is active in several businesses and activities, ranging from traditional trade credit insurance, financing related to exports, and reinsurance. Credendo is protecting Belgian undertakings in China against political risk. Political Risk Insurance (PRI) covers the investments made by a Belgian company in a foreign enterprise, excluding commercial risks. Investments can be equity, structured loans or quasi equity, such as loans without repayment schedule. Credendo’s PRI covers the risk of expropriation; political violence; business interruption for six months; currency inconvertibility and transfer restrictions; award default and embargo. Award default means that if you have been awarded authorization but the government suddenly decide that you cannot continue your business anymore and they do not honor international arbitration. Credendo also offers ECA funded solutions for tenors from two to five years focussed on SMEs, including forfaiture and buyer credits. Credendo can also offer financial guarantees for bank loans.
The country risk of China is available on the Credendo website. To manage your risks, you can use the Credendo Risk app.
Contact: Wim Bosman: w.bosman@credendo.com
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