Chinese partnership seeks to raise funds for US cannabis supplement sector

06-Dec-2016 - Last updated on 08-Dec-2016 at 04:15 GMT

The legal cannabis industry in the US is expected to be worth $50bn by 2026. ©iStock

A Chinese financial website and a private equity fund have sealed a deal to raise capital form mainland China to invest in the US cannabis supplements and functional beverage sectors.

ChineseInvestors.com (CIIX) and Shenzhen Yuanrong PE Capital (Yuanrong) said it would seek to target and fund two types of “propitious investment opportunities in the new emerging industry of medical and recreational cannabis.”

The first is manufacturers of CBD oil, the non-psychoactive concentrate extracted from cannabis.

The use of CBD oil has been legalised in 50 states in the US, and it can also be exported to more than 40 countries including China.

It can be widely used in nutrition supplements, skin care products and functional beverages, with the partnership saying it has strong sales potential via traditional or direct sales channels.

“Because China has a prospective consumer base of 1.5bn people, whoever takes the first step to invest in these CBD oil manufacturers could have potentially towering profit opportunities,” they said in a statement.

Investor relations

The second category for investment includes Chinese manufacturers that export products to the US, such as companies focusing on soil-free indoor gardening, energy-saving LEDs, greenhouse engineering design and greenhouse hardware.

CIIX and Yuanrong will provide the companies with the individual and institutional funds raised in China, assistance in becoming publicly-traded in the US market, and investor relations services to improve their visibility and profitability.

Founder and CEO of CIIX said: “According to recent projections from Cowen & Co., one of the most preeminent boutique investment firms on Wall Street, the legal cannabis industry in the US is expected to be worth $50bn by 2026, expanding to more than eight times its current size. In addition, investment banks focusing on the cannabis industry have increased from one to five during the latest year.

“Many manufacturers in China want to participate in the cultivation of cannabis, and the recent strength of the US dollar exchange rate provides a further advantage to Chinese manufacturers.

"However, investors from mainland China have little access to information and insights about the US cannabis industry. Fortunately…we are very confident our new strategic alliance with Yuanrong will provide Chinese individuals and institutional investors with the researched news in 2017.”

Despite the partnerships' optimism, CBD supplements occupy a fuzzy regulatory space in the US. Medical cannabis has been approved in 28 states, and CBD products are on the market in dispensaries in most of those.

But the source plant—cannabis—is still a controlled substance at the federal level. And while CBD proponents claim their products are derived from industrial hemp, a version of cannabis that has very little psychoactive content, the Food and Drug Administration has serious reservations about the use of CBD in supplements.