Imagine you run a $385-billion sovereign wealth fund for a Gulf emirate. Your capital comes, ultimately, from oil, and your job is to turn it into things that will still be worth something when the oil matters less. You can buy skyscrapers. You can buy football clubs. You can buy stakes in semiconductor fabs and AI startups. Or, as Abu Dhabi’s Mubadala Investment Company did in September, you can spend $1 billion on a minority stake in a Chinese coffee chain whose product lineup includes Pineapple Cold Brews and Grape Fizzy Americanos, and whose customers order entirely through an app.
The chain is Luckin Coffee, which has more than 36,000 stores globally and, as CNN reports, built its empire on cheap drinks, relentless expansion and an app-first model that eliminates ordering lines and counter payments altogether. And the interesting thing is that the deal is not really about the coffee. It is about what a $1 billion position in Luckin says about how one of the world’s bigger pools of patient capital now reads the Chinese economy.
Mubadala has been at this for a while. In 2015 it partnered with China Development Bank Capital and China’s State Administration of Foreign Exchange on a $10 billion UAE-China global investment fund, and the fund says it has since made more than 100 investments in the country — more than $20 billion over the last decade — spanning consumer businesses, healthcare and technology. The portfolio includes Shein, the fast-fashion giant; UCB’s pharmaceutical business in China; and Newland Commercial Management, which manages hundreds of shopping malls, bought as part of a consortium that included the Abu Dhabi Investment Authority. Mubadala formally opened a Beijing office in 2023. (CNN asked the Abu Dhabi Investment Authority for comment and didn’t hear back.)
The conventional line on China is that the economy has slowed, so you might expect outside investors to be wary. Mubadala’s view, per Chiara Spina, a professor of entrepreneurship and family enterprise at INSEAD Abu Dhabi, is more surgical. “(Mubadala) don’t see the fact that the overall economy has slowed down as something that is killing all good investment opportunities,” she told CNN. “And so the question is: where are the right investment opportunities within that economy overall?” Her broader point: what looks like a new wave of Gulf money into China is “actually a bit of an acceleration of a trend that started years ago,” strengthening as China tilts toward consumption and technology while Gulf states try to diversify away from oil.
Spina notes the timing also reflects hedging. With the ongoing impact of the Iran war, she says, “everyone is thinking about how to diversify and how to hedge against dynamics that are outside everyone’s control.” And Mubadala is not alone at the trough. In 2024, Saudi Arabia’s Public Investment Fund signed six agreements with major Chinese financial institutions covering up to $50 billion in potential cooperation; last year the Qatar Investment Authority bought a 10% stake in China Asset Management, one of the country’s largest fund managers.
So why Luckin? Founded in 2017, it survived an accounting fraud scandal that got it delisted from the Nasdaq and came back to become one of China’s leading coffee chains. Its base is young and digitally savvy; new products arrive constantly; the whole transaction lives in the app. Spina suspects that digital layer is exactly what attracted the fund: “I think they invest in a space where there is a component that can be scaled and enables growth … through technology.” Mubadala’s portfolio already runs through semiconductors, data centers, AI and software — a cheap-coffee app with tens of millions of users fits the pattern better than a chain of cafés with baristas and queues.
Notice, too, what the $1 billion is not for. Michael Chen, a partner at Centurium Capital, Luckin’s largest shareholder, said the company already generates enough cash that it doesn’t need the money for operations. What Luckin wants is Mubadala itself. “We believe that the connection will actually help us to expand overseas,” Chen told CNN. Luckin’s international footprint is still small — Singapore, Malaysia and, most recently, New York City — and it has yet to open in the Gulf, a market Chen said could be part of future discussions. He described Mubadala as a long-term shareholder with a “vision” that could “help grow the company,” not one looking for a quick return. Mohamed Albadr, Mubadala’s head of Asia private equity, said in the joint press release that the investment would “support the company’s next phase of growth in China and internationally.”
The shape of the transaction, in other words, is a swap of assets that aren’t money. One side contributes a billion dollars and a likely lobbying presence across the Gulf; the other contributes the equity and, maybe, the right to bring Grape Fizzy Americanos to Abu Dhabi. Sovereign wealth funds like to say they invest with a horizon measured in decades. This is what that looks like in practice: the long term, in a paper cup, ordered on an app.