Date
16 October 2017

Britain opens arms to woo Chinese investors

Two Chinese companies have just won approval from the British government to acquire 30-40 percent of a £16 billion (US$27.53 billion) nuclear power plant. Another Chinese energy firm is bidding for a coal-fired power station that supplies 4 per cent of Britain’s electricity needs.

These are the two most recent examples of China’s rapidly rising investment in the country that was the first colonial power to challenge the Qing empire.

How history has changed. “There is an ambition in the country and a sense of optimism and ‘can do’, which our country had in the Victorian era,” British Chancellor of the Exchequer George Osborne said at the end of a five-day trip to China in October. “Britain is no longer great, is defeatist and unambitious and needs to be more like China.”

With London mayor Boris Johnson, Osborne went to China to court its investment, capital and technology. Thirty years ago, Chinese delegations went to Britain and other European Union countries. Now Britain is competing fiercely with Germany, France and other EU members for this Chinese capital, as well as tourists and students.

Last year Britain received US$62 billion in foreign direct investment, an increase of 22 per cent over 2011, according to the World Investment Report of the UN Conference on Trade and Development. Globally, FDI fell by 18 per cent to US$1.35 trillion and in Europe by 42 per cent.

China’s overseas direct investment last year increased 17.6 per cent to a record US$87.8 billion, ranking third as a foreign investor after the United States and Japan, according to the Ministry of Commerce. Britain rose to fifth place as a destination for Chinese firms, up from eighth in 2011 and 21st in 2010.

More than 400 Chinese companies have set up operations in Britain, including its five largest banks. Among the biggest investments is a £1 billion project by Chinese developer Advanced Business Park to transform London’s Royal Albert Dock into an Asian business port.

Then there is Ni Zhaoxing, chairman of Zhongrong Group, who said in October that he will invest US$806 million to build a replica of the 83,000-square-metre glass halls of the Crystal Palace in south London that housed the Great Exhibition of 1851. It will become a tourist centre and a venue for art collectors from all over the world to showcase and trade their collections.

Dalian Wanda is putting £700 million into a luxury hotel and residential complex in London; it will be the first such hotel owned by a mainland Chinese company.

The biggest mainland investor in the country is Huawei, which opened its first office in Britain in 2001. It has 15 offices and 890 employees across the country and plans to increase the payroll to 1,500 by 2017. Huawei has announced investments of £650 million and procurements of £650 million in services by 2017. In 2011, it opened a British research and development center in Ipswich after acquiring CIP, the Center for Integrated Photonics. In April 2013, it opened its new British headquarters in Green Park, Reading.

Because of this substantial investment, British Prime Minister David Cameron received Huawei chief executive Ren Zhengfei in person at Downing Street in September 2012.

This year Huawei hired Serge Abou, the EU ambassador to China between 2005 and 2011, to work as its consultant in Brussels. It spent 3 million euro (US$4.13 million) lobbying in the EU capital last year, the eighth-highest total of any company or institution.

There are conflicting statistics on which EU country attracts the most Chinese outward direct investment. All the data show that Britain, Germany and France lure the bulk of the money. China has signed bilateral investment protection agreements with six EU countries, including those three; the EU has invited it to negotiate an EU-wide investment treaty, to offer a unified investing environment to Chinese companies.

Even with such a treaty, the members will continue to compete with each other to bring in Chinese capital.

The advantages of Britain include the fact that, whichever party is in power, the government regards FDI as a priority. “We found through all the investments that the Chinese are a very straightforward and transparent partner,” Osborne said in Beijing.

In addition, Britain uses English, the most common foreign language in China. London is the financial capital of Europe and the world’s most international city. Like most foreigners, Chinese feel comfortable living there. It has a stable and democratic political system, a strong legal structure and what many consider a safe-haven currency.

It has a tax system favourable to resident foreigners and offers citizenship after only five years of residence. It has a diverse and flexible labour market, less strict than those of France and Germany.

Many of those who run Chinese companies and institutions studied in Britain, which ranks second to the US as the most popular destination for Chinese students going abroad. This year, more than 100,000 Chinese will study there. This gives them a familiarity and connections they do not have with other European countries.

Mark O’Neill, a Hong Kong-based journalist and author, writes on Greater China. He has worked as a correspondent for the South China Morning Post in Beijing and Shanghai.

SK

Hong Kong-based journalist and author. He had worked as a correspondent for the South China Morning Post in Beijing and Shanghai.

EJI Weekly Newsletter

Please click here to unsubscribe