Japan banks, China Investment to set up USD1.8b trade fund

The deal coincided with Shinzo Abe’s visit to China. Abe (left) pictured with Xi Jinping in Beijing

Japan’s biggest banks and brokerages agreed to set up a USD1.8 billion fund with China’s state-run investment group to help companies enhance trade between the nations.

The fund with China Investment Corp. is expected to raise between 100 billion yen and 200 billion yen ($1.8 billion), Nomura Holdings Inc. spokesman Kenji Yamashita said by phone. The other participants are Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc. and Daiwa Securities Group Inc.

The deal is among several to coincide with Prime Minister Shinzo Abe’s visit to China, where he is meeting President Xi Jinping as part of the first bilateral visit by a Japanese leader in seven years. Ties between Japan and China, long-time economic and political rivals, are now warming as both nations face trade threats from the Trump administration.

“The fund aims to enhance bilateral trade and investment relations between China and Japan by investing in Japanese companies seeking to expand their businesses into China, as well as Chinese companies and companies from other third-party countries,” Nomura said in a statement.

Nomura is seeking to expand in China, having this year applied to acquire a majority stake in a securities joint venture as authorities there loosen ownership rules. Under Chief Executive Officer Koji Nagai, Japan’s biggest brokerage is seeking to do retail and wholesale business in the country to make up for diminishing growth opportunities at home and faltering results in Europe.

CIC, China’s $941 billion sovereign wealth fund, has been promoting bilateral funds to boost investments and reduce potential barriers in overseas markets. In August, it announced the closing of an initial $1.5 billion round for a $5 billion China-U.S. manufacturing fund with Goldman Sachs Group Inc. Takashi Nakamichi, Bloomberg