Abu Dhabi’s sovereign wealth fund Mubadala has entered into a $1 billion investment deal with China’s Luckin Coffee, marking an expansion of its portfolio in the Chinese consumer market. The announcement, made this week, reveals Mubadala joining forces with Centurium Capital, Luckin’s controlling private equity shareholder, to support the coffee chain now operating approximately 36,000 stores worldwide.

Mubadala did not specify the exact amount of its minority stake in the transaction, which represents a renewed commitment to Luckin Coffee despite the company’s controversial past. In 2020, Luckin filed for bankruptcy in the United States following an accounting fraud scandal that led to its delisting from the Nasdaq stock exchange and a settlement with the U.S. Securities and Exchange Commission.

This investment continues Mubadala’s broader strategy of diversifying Abu Dhabi’s economy beyond oil, with growing emphasis on the consumer sector in China, the world’s second-largest economy. The fund, valued at $385 billion, has been active in the Chinese market since 2015, having invested more than $20 billion across sectors including e-commerce and real estate. Mubadala’s portfolio includes stakes in companies such as online fashion retailer Shein and Dalian Wanda’s mall operations. The firm has maintained a Beijing office since 2019 to bolster its regional presence.

The deal with Luckin, which remains subject to certain conditions, also allows Mubadala to nominate a director to the company’s board, signaling a degree of influence over its future direction. Mohamed Alabd, Mubadala’s head of private equity, underscored the fund’s positive long-term outlook on China’s consumer market, citing sustained demand for beverages like matcha lattes and Apple Fizzy Americano as examples of shifting preferences among Chinese consumers.

Founded in 2017, Luckin grew rapidly by offering competitively priced coffee and expanded aggressively through the Chinese market before listing on the New York Stock Exchange in 2019. After overcoming its financial scandal with Centurium’s support, the company reclaimed a leading position in China’s coffee industry and has recently surpassed Starbucks in sales within the country. According to Luckin’s most recent annual report, it operated nearly 31,000 stores across China and Hong Kong at the end of last year, with additional outlets in Singapore, Malaysia, and the United States. By comparison, Starbucks maintains a global footprint of about 40,000 stores.

Mubadala’s investment in Luckin reflects a continued balancing act for Abu Dhabi, which is simultaneously enhancing economic ties with China while navigating geopolitical tensions that have cast scrutiny on investments in strategic sectors such as semiconductors and artificial intelligence. The coffee chain deal thus broadens Mubadala’s exposure to less politically sensitive areas of China’s growing consumer economy.