First Eastern launches fund to link UK and China

The fund, which is targeting $500m, will invest in UK SMEs looking to expand into China.

Hong Kong-based First Eastern Investment Group has launched a $500 million fund aimed at providing expansion capital to UK firms hoping to break into the Chinese market, the company said in a statement.

The statement noted that while there was keen interest from UK-based small to medium sized enterprises (SMEs) to tap into the Chinese market, foreign direct investment into China by British SMEs remains limited due to a lack of expertise or resources- something the new vehicle, dubbed the UK China Fund, hopes to address.

“The initiative we are launching today will create further synergies between our two economies,” said Victor Chu, chairman and chief executive officer of First Eastern.

British Prime Minister David Cameron welcomed the launch, calling it a welcomed investment and a boost to UK’s economy, the statement said.

First Eastern added that it would co-invest up to $100 million alongside the fund on a project by project basis.

It is unclear who the target LPs for the fund are or when it is expected to see a first close. First Eastern did not comment by press time.

Far Eastern has been backing UK businesses with ambitions to expand into Asia since before the launch of the fund. Last year, the firm acquired the majority interest of investment banking and securities operations Evolution Securities China and launched an expansion strategy for the company’s activities in China.

In the retail sector, in November 2009 the firm backed luxury bag maker Lulu Guinness to extend its presence in Japan and the rest of Asia. A month later the firm entered a joint venture with Monitise, a UK-listed mobile banking and payments company to develop its mobile money network across Hong Kong, China and other parts of Asia.

Beyond the UK, the firm had in January this year announced the launch of a $250 million Dubai fund targeting investments in business services companies in sectors including oil and shipping as well as in Gulf hotels that cater to the increasing number of Chinese visitors to the region.Chu told the Financial Times then that First Eastern would use its contacts to help companies based in Dubai gain ground in China and across Asia.