China's CICC enters S.Korea with its private equity fund

BEIJING – CICC Capital, a unit of China International Capital Corp. (CICC), has entered the South Korean market with the launch of a private equity fund, aiming to invest in promising firms in China and Korea.  

Banking sources said on Wednesday that the Financial Supervisory Service (FSS) on Nov. 29 approved the registration of CICC Capital’s fund, with the value undisclosed, targeting the semiconductor, bio, new materials and other growth sectors.

The Korean financial regulator has withheld approval of the fund for more than a year as it had been carefully scrutinizing filings by CICC, one of the largest investment banks in China, sources said.

The approval is part of the Korean government’s efforts to improve its relationship with China, according to sources. Korea is facing supply chain disruptions as China tightens exports of urea, a substance used in diesel cars and fertilizers, and graphite, a key material for electric vehicle batteries.

CICC and Seoul-based CICC Ascent, a JV between the Chinese IB and Korean PE house Ascent Equity Partners, will jointly manage the fund for fast-growing companies, including Korean firms with high growth potential in China.

The Chinese bank will increase the fund value to 500 billion won ($378.8 million) and create more funds in Korea to attract a combined 4 trillion won, according to sources. CICC and other Chinese limited partners will commit to the fund, alongside some Korean companies as strategic investors.

CICC and the JV tapped 10 firms for funding around early 2022. They are planning to expand the investment destinations all across Asia.

Ascent Equity Partners will lead the identification of target companies in Korea, according to sources. Established in 2020, the PE house has invested in semiconductor startup Sapeon Inc., medical device maker Wontech Co., entertainment content producer The Pinkfong Company and others.

CICC Capital’s advancement into Korea is part of the Chinese government’s efforts to strengthen investment ties with its Asian neighbors, market insiders say. Korean authorities also approved the fund registration considering economic interests between the two countries, they added.

China increasingly needs cooperation with Korea to limit global supply chain disruptions, and there is a lot of work going on below the surface to rebuild their bilateral relationship, said one industry official.

Write to Ji-Hoon Lee, Hyun-Woo Kang and Ji-Eun Ha at lizi@hankyung.com

Jihyun Kim edited this article.