Trekking to Riyadh

By Qian Ren and Muxin Xu

Edited by Jing Liu

Ice and Fire in Riyadh

Pass through the circular fountain plaza and enter the palace-like Ritz-Carlton — the finest hotel in Riyadh. On October 24, it was hosting the FII (Future Investment Initiative), the most consequential economic forum of the year in Saudi Arabia.

Now in its seventh edition, the summit launched by Crown Prince Mohammed bin Salman carried the theme "The New Compass." This may also have been its most explosive iteration yet.

Officials had announced over 5,000 invited guests, yet by the first morning, attendees on the ground said the crowd had already surpassed 6,000. Rumors swirled that scalped tickets were going for $20,000 apiece. Perhaps because access was especially scarce this year, FII membership was strictly enforced for the first time — with the cost of joining running roughly 100,000 RMB.

If you've been to the UAE or Qatar before, the moment your car pulls away from Riyadh airport, you might feel a jarring contrast. Compared to their opulence, this place feels almost austere. Yet even here, the cheapest room at the Ritz-Carlton had surged to 11,000 HKD per night.

After paying these prices, you'd find yourself among the world's business elite — Ray Dalio of Bridgewater, Jamie Dimon of JPMorgan, Larry Fink of BlackRock, Stephen Schwarzman of Blackstone, and Neil Shen of Hongshan. Saudi Crown Prince Salman was in attendance, as was South Korean President Yoon Suk-yeol. At the final session of the three-day conference, Sabrina Ho, daughter of the late "gambling king" Stanley Ho, could be seen seated at the center of a roundtable.

Chinese visitors had come too. Word has it that over 300 Chinese funds and companies participated this year. E Capital told Anyong Waves that attendance at their "China Night" event during FII had doubled from last year.

On October 25, Pony.ai secured a $100 million investment from NEOM and its NIF fund. CEO Peng Jun and CTO Lou Tiancheng both appeared at the event that evening. Carbonbase founder Song Hongkai earned a speaking slot at a session titled "The Board of the Future," featuring young CEOs from around the world.

As for institutions, Song told Anyong Waves, the crowd skewed heavily toward established dollar funds and family offices. Pure RMB funds were scarce — mostly dual-currency players like Cathay Capital and Qiming Venture Partners.

Mingming Huang, founding partner of Mingshi Capital, was also on the ground. He told Anyong Waves that FII was just the first stop of his Middle East trip. After the conference, he would depart from Saudi Arabia with more than a dozen portfolio companies from Mingshi's tech portfolio to conduct deep dives across several major Middle Eastern countries — a collective exploration, start to finish.

As you know, converging factors are rapidly making the Middle East a center of transformation — especially for Chinese business. Over the past year, Anyong Waves has regularly heard of domestic investors and founders organizing group trips to the Middle East in search of capital and resources, at one point mockingly dubbed the new "Hundred Regiments Offensive." But regrettably, beyond a handful of companies aligned with local development plans that secured investment, most people — particularly investment institutions — haven't gotten the results they hoped for.

In our interviews, a consensus emerged: In fact, as early as two or three years ago, Gulf countries led by the UAE and Saudi Arabia had already stopped talking about investing in companies with "non-Middle East narratives." Last November, when Saudi Arabia stunned the world by upsetting Argentina in the World Cup, Anyong Waves published "That Night Belonged to Saudi Arabia, But Not to Chinese Funds Raising in the Middle East." A year on, Chinese GPs' Middle East roadshow remains a long and uncertain journey, we've learned.

Yet this hardly diminishes the fact that amid shared global economic headwinds, the Middle East represents something strikingly new.

"Every Opportunity Is Written in This Booklet"

Of the Gulf states, the UAE is surely the most familiar. Especially its signature Burj Khalifa, the "world's tallest building." It's also where the Chinese diaspora is most concentrated in the Middle East. But over the past year, attention toward Saudi Arabia has surged dramatically.

A Middle East partner at ChangLei Capital noted that compared to Saudi Arabia, the UAE is merely a springboard — a hub connecting the Middle East to the world. But they're not even in the same league, "like comparing Shanghai to Guangdong Province."

A founding partner at a Saudi consulting firm told us, "At least several hundred GPs have come to Saudi Arabia this year, but not one has actually raised money." Yet he conceded that compared to the sovereign funds of the UAE, Kuwait, and Qatar, "Saudi Arabia's sovereign wealth fund (PIF) is actually the hardest to tap."

This stems partly from the vast gap between the kingdom's state capital, which holds enormous funds, and its feeble private capital — creating a siphoning effect where the former is the deep pocket Chinese GPs seek, yet one they may never even get a meeting with.

On the other hand, due to Saudi Arabia's particular history, state capital with a strategic mission is destined to serve the nation's future development plans. This means only by mastering their discourse and understanding their real needs can you even get a seat at the negotiating table.

"Many excellent funds come to Saudi Arabia full of excitement and leave disappointed," said Cynthia, a supplier to the Saudi Tourism Authority, telling Anyong Waves that the fundamental problem is failing to ground their understanding of Saudi investment logic in the kingdom's specific circumstances. The Vision 2030 launched in 2016 clearly mapped its economic trajectory and 2030 targets, including breaking into the world's top 15 economies from 19th place, and expanding PIF's assets to $7 trillion to become the world's largest sovereign fund.

"Every opportunity is written in this booklet," a local founder told us.

A Saudi-based investor said that whether government or private capital, Saudi investors lean toward localized investments. Even when investing globally, they want to attract advanced technology, top talent, and entertainment IP to Saudi Arabia. "Compared to the UAE, most of Saudi Arabia's spending is aimed at national and ethnic revitalization."

From a purely financial returns perspective, Saudi Arabia actually prefers Western markets. This is evident in team composition: beyond native decision-makers, many expatriate professionals are Indian or Western, with East Asian faces relatively rare.

This has created a persistent phenomenon for Chinese investors seeking Saudi capital: it's essentially a mission impossible.

At an investment roundtable during FII, when the moderator asked how many entrepreneurs and VCs were in the room, hands shot up across the hall. When he asked who the LPs were, only one hand rose. Those investors hoping their "sky-high ticket" would buy entry into LP circles were likely disappointed.

In July, Mingming Huang had already led the Mingshi team to the Middle East; this time he returned as a invited speaker for a dialogue session on FII's opening day. His sense was that everyone held strong interest in the China market, but GPs getting capital was certainly no easy feat.

He said that in current market conditions, only the most top-tier, specialized funds with top-tier track records have any chance of partnering with Middle Eastern sovereign funds and financial institutions. "Don't think you can run over a few times and get money — that would be taking this too lightly."

Cynthia told us that chatting with Saudi founders in Riyadh, she often hears one line: "In Saudi, everything is connected and PIF push everything" — if you're fully or partially owned by PIF, your government resources and industry resources all flow together. "PIF plays a completely dominant role."

Indeed, Saudi Arabia's sovereign wealth fund PIF (Public Investment Fund) had long been rather mysterious. Though established in the 1970s, it made hardly any notable moves abroad until the current crown prince took power — when it became active with moves like $45 billion into SoftBank's Vision Fund, Aramco's partial IPO, football club acquisitions, and investments in numerous global VC/PE firms and industry leaders.

By one count, since 2017 PIF has actively created roughly 80 companies across 13 sectors. Beyond its traditional real estate, infrastructure, and energy plays, PIF has focused on technology, tourism, and entertainment — precisely the three sectors Saudi Arabia previously lacked.

As the "sugar daddy" in global eyes, Sanabil — PIF's fully owned investment vehicle — has drawn particular attention. As an LP, Sanabil backs giants including KKR, Blackstone, GA, Coatue, and Apollo. And Anyong Waves has exclusively learned that one Chinese dual-currency fund has also secured capital from Sanabil.**

Beyond state capital, compared to countries like China and the US or neighbor UAE, Saudi Arabia's pure private investment fund ecosystem is remarkably barren. Most institutions are tethered to massive state-owned enterprises or family conglomerates, and in terms of autonomy and purpose, function more like corporate venture arms.

Silver Linings Playbook

Despite the formidable obstacles, Saudi Arabia does represent incremental opportunity for Chinese entrepreneurs and investors. For China's industry, capital from the UAE, Qatar and others has long been Old Money. Years ago, major sovereign funds established China offices, though most invested in secondary markets — Abu Dhabi Investment Authority's A-share holdings reached $3.5 billion, for instance. But Saudi Arabia's massive capital only began opening to the world seven years ago.

Among Middle Eastern nations, Saudi Arabia is something of an outlier. Long relatively closed off, its roughly 2.25 million square kilometers represent something like undeveloped new frontier compared to the UAE.

"For Chinese companies going global in the Middle East, skipping Saudi Arabia means losing roughly 60-70% of the opportunity," a tool-app founder told us. Those who truly know Saudi Arabia's business world remain largely SOE leaders from energy and infrastructure, Huawei and ZTE which entered the Middle East years ago, and certain frequent traders.

Just five days prior, Saudi Arabia announced the establishment of a $5 billion strategic investment vehicle — the NEOM Investment Fund — with Chinese company Pony.ai securing $100 million. The investment came with a precondition: Pony.ai and NEOM plan to establish a joint venture in NEOM to develop and manufacture autonomous driving technology for Saudi Arabia, the broader Middle East and North Africa, deploying autonomous vehicle fleets and smart vehicle infrastructure.

Multiple founders told Anyong Waves that Saudi Arabia is highly ambitious in attracting investment. "One fairly obvious mechanism is localization — there are quite strict requirements around heavy industrial presence and job creation."

In other words, the trust-building threshold remains high. "Previously when Chinese companies went over, it was basically Chinese government-led delegations with major SOEs doing local setup; private enterprises went less frequently. This year, Chinese companies heading to the Middle East and Saudi Arabia have become noticeably denser," the ChangLei Capital Middle East partner told us.

In his view, this is driven partly by Saudi sovereign fund dynamics, and partly by the Saudi crown prince's diligence and relative openness.

Compared to the UAE, Saudi capital is indeed better suited for enterprises and institutions willing to commit to Saudi business expansion.

China's new energy sector likely holds the world's most pronounced advantage. Large numbers of listed companies and state enterprises have already forged multifaceted cooperation with Saudi Arabia. Publicly announced partnerships include China Energy Engineering Corporation, CGN, LONGi Green Energy, Trina Solar, and Jinko Power — among many others.

Opportunities are emerging across many sectors, but one word is inescapable: "localization." "Especially in government-facing and B2B sectors, registering a local company or joint venture is practically mandatory — only with localization can channels and resources gradually open up, and Saudi Arabia's massive investment pools and development projects extend their olive branches," another founder told us.

"Chinese and Saudis both misunderstand each other — both think the other side is loaded," one investor quipped. "Chinese investors come looking for LPs; Saudis want Chinese investors bringing companies and capital to develop Saudi Arabia." So in his view, if you identify the Middle East as an opportunity market, it's best to make localization moves first.

Though many difficulties have been loudly telegraphed, much as Southeast Asia once seduced China's primary market, everything Middle Eastern now seems to represent opportunity, wealth, and surging crowds. A month ago, Saudia Airlines launched direct flights between Beijing and Riyadh, and King Khalid International Airport debuted Chinese signage for the first time.