Abu Dhabi's sovereign wealth fund Mubadala has invested $1 billion in China's Luckin Coffee, widening its presence in the world's second-largest consumer market. The $385bn investor joined Centurium Capital, Luckin's controlling shareholder, to back the coffee chain operating about 36,000 stores globally. This deal extends Mubadala's position as one of the world's most acquisitive sovereign wealth funds, helping diversify Abu Dhabi's oil-dependent economy.

The transaction broadens Mubadala's exposure to China's consumer sector amid geopolitical scrutiny of US-China investments. Mubadala has invested over $20bn in China since 2015, including stakes in Shein and Dalian Wanda. With the Luckin deal, subject to conditions, Mubadala bets on Chinese consumers' appetite for beverages like matcha lattes and Apple Fizzy Americano.

Mohamed Albadr, Mubadala's private equity Asia head, stated they see compelling long-term opportunities in China's consumer sector. As part of the transaction, Mubadala will nominate a director to Luckin's board. Gulf sovereign wealth funds have become increasingly assertive when investing, seeking greater management say.

Luckin, founded in 2017, rapidly expanded in the Chinese coffee market with low prices before listing in New York in 2019. A year later, the company disclosed employees had fabricated sales worth about $300mn, forcing business restructuring. More recently, with Centurium's backing, Luckin engineered a turnaround and overtook Starbucks as China's biggest coffee chain by sales.

Luckin had nearly 31,000 stores in China and Hong Kong at the end of last year, with 81 outlets in Singapore, 70 in Malaysia and nine in the US. Starbucks has about 40,000 stores globally.