Keep­ing the doors open

Fa­vor­able poli­cies have helped un­lock the huge in­vest­ment po­ten­tial in the UK, says trade of­fi­cial, Ce­cily Liu re­ports

China Daily (Hong Kong) - - BUSINESS FOCUS -

Trans­parency and a fa­vor­able en­vi­ron­ment for for­eign in­vestors have helped the United King­dom at­tract more in­vest­ment from China, says the top of­fi­cial of the Bri­tish gov­ern­ment re­spon­si­ble for in­ward in­vest­ment.

“I think it’s highly un­likely that any other de­vel­oped coun­try would be as open to in­vest­ment, not just from China, but more gen­er­ally, as we are,” says Nick Baird, CEO of UK Trade & In­vest­ment.

Baird says that the cur­rent level of Chi­nese in­vest­ment in the UK in­fra­struc­ture sec­tor is a good gauge of the trans­parency and open­ness in the coun­try.

Che­ung Kong In­fra­struc­ture Hold­ings, an in­vest­ment ve­hi­cle con­trolled by Chi­nese bil­lion­aire Li Ka-shing, owns Bri­tish wa­ter util­ity Northum­brian Wa­ter Group Plc. Last year, China In­vest­ment Corp, the na­tion’s sov­er­eign wealth fund, bought a 10 per­cent stake in Heathrow Air­port Hold­ings and an 8.68 per­cent stake in Thames Wa­ter Util­i­ties Ltd.

More re­cently, Bri­tish Chan­cel­lor of the Ex­che­quer Ge­orge Os­borne an­nounced that the UK would al­low Chi­nese com­pa­nies to take ma­jor­ity stakes in Bri­tish nu­clear power plants.

Os­borne’s com­ments came af­ter spec­u­la­tion that the Bri­tish gov­ern­ment would not al­low Chi­nese com­pa­nies to hold ma­jor­ity stakes in the French util­ity ma­jor EDF’s planned power sta­tion at Hink­ley Point, in South­west Eng­land, for na­tional se­cu­rity rea­sons.

“We are happy to in­volve Chi­nese com­pa­nies in all as­pects of our econ­omy. So in­vest­ing in Bri­tain’s nu­clear in­dus­try is a good ex­am­ple, be­cause you can’t get any more sen­si­tive than that,” Baird says.

He says another ex­am­ple is the Chi­nese telecom­mu­ni­ca­tion gi­ant Huawei Tech­nolo­gies Co Ltd’ in­vest­ments in the UK, which have not been shack­led in any man­ner.

In Septem­ber 2012, Huawei an­nounced an ad­di­tional in­vest­ment of 1.3 bil­lion pounds ($2.13 bil­lion) in its UK op­er­a­tions over a five-year pe­riod to 2017. This will cre­ate 700 new jobs.

“Huawei is a very wel­come in­vestor in the UK. We are con­fi­dent about the in­vest­ments we have with Huawei. We are look­ing for­ward to them grow­ing their in­vest­ments even fur­ther,” Baird says.

In com­par­i­son, Huawei has been barred from con­duct­ing any merg­ers and ac­qui­si­tions in the United States af­ter a House In­tel­li­gence Com­mit­tee re­port warned last year that the com­pany was a se­cu­rity threat.

Baird says he is glad to have wit­nessed many first-of-its-kind Chi­nese in­vest­ments in the UK.

Cit­ing ex­am­ples, he says that Chi­nese fash­ion re­tailer Bosi­deng In­ter­na­tional Hold­ings Ltd has be­come the first Chi­nese fash­ion brand to open a flag­ship store in Lon­don, while Dalian Wanda Group be­came the first Chi­nese com­pany to op­er­ate in the lux­ury sec­tor af­ter ac­quir­ing Bri­tish yacht maker Sun­seeker.

He says Chi­nese in­vest­ment has helped the Bri­tish econ­omy, as it brings much-needed cap­i­tal for ail­ing com­pa­nies.

He says nu­clear power is a good ex­am­ple, be­cause the Bri­tish gov­ern­ment had in the past failed to at­tract in­vest­ment for the Hink­ley Point project. The po­ten­tial Chi­nese in­vest­ment will cer­tainly cre­ate many lo­cal jobs, he says.

Baird says the Bri­tish gov­ern­ment is keen on more Chi­nese com­pa­nies mak­ing ac­qui­si­tions in the UK, be­cause such deals help lo­cal firms to ex­pand through in­vest­ment in re­search and de­vel­op­ment.

“The (Bri­tish) com­pa­nies are quite suc­cess­ful, but can’t get in­vest­ment to grow faster, be­cause R&D in­volves huge up­front costs, some­thing that is tough for smaller com­pa­nies,” he says.

Baird says that for­eign in­vestors con­trol 40 per­cent of the UK in­fra­struc­ture sec­tor, and a ma­jor­ity of its au­to­mo­tive in­dus­try. “We are not un­duly wor­ried about this and wel­come all types of in­vest­ment be­cause it helps grow the lo­cal econ­omy.”

Baird says he sees enor­mous po­ten­tial for Chi­nese in­vest­ment in phar­ma­ceu­ti­cals, life sciences, films, me­dia and fash­ion. He says th­ese are all sec­tors the UK has ex­per­tise in, while China is ex­pe­ri­enc­ing grow­ing do­mes­tic de­mand.

Baird says the UK has ex­cel­lent R&D skills and a num­ber of sci­ence parks with tax in­cen­tives for for­eign in­vest­ment, such as the sci­ence parks af­fil­i­ated with the Univer­sity of Ox­ford and the Univer­sity of Cam­bridge.

He says there is great po­ten­tial for Chi­nese phar­ma­ceu­ti­cal and life sci­ence com­pa­nies to de­velop new prod­ucts in the UK for the Chi­nese do­mes­tic mar­ket as well as ex­port them to Europe.

He says the UK’s film pro­duc­tion ex­per­tise should prove at­trac­tive for po­ten­tial Chi­nese in­vest­ment, for the same rea­son that many US films are pro­duced in the UK, in­clud­ing the Game of Thrones TV se­ries and the lat­est Star Wars film.

Baird says fi­nan­cial ser­vices is another area that has great po­ten­tial, be­cause the UK is a global fi­nan­cial center and China is in the process of in­ter­na­tion­al­iz­ing its fi­nan­cial sec­tor. He says po­ten­tial for co­op­er­a­tion is par­tic­u­larly strong in Lon­don’s de­vel­op­ment as an off­shore ren­minbi hub.

Baird says other ar­eas suit­able for co­op­er­a­tion in­clude re­new­able en­ergy, ad­vanced man­u­fac­tur­ing, in­fra­struc­ture, aero­space, telecom­mu­ni­ca­tion and au­to­mo­biles.

At the same time, Baird also ac­knowl­edges ob­sta­cles to Sino-UK co­op­er­a­tion, in­clud­ing visa pro­cess­ing com­pli­ca­tions, trans­port con­nec­tiv­ity and lack of knowl­edge about op­por­tu­ni­ties.

In re­cent years busi­ness groups have lob­bied the UK gov­ern­ment to sim­plify its visa process for Chi­nese visi­tors, who need to make a sep­a­rate ap­pli­ca­tion for the UK in ad­di­tion to their Schen­gen visa to EU coun­tries. Bri­tain’s lim­ited air­port con­nec­tiv­ity with China also at­tracted crit­i­cism, in that it is fall­ing be­hind Euro­pean hubs such as Am­s­ter­dam.

But Baird says the visa is­sue is “more per­cep­tion than re­al­ity”, and the UK gov­ern­ment is work­ing hard to en­cour­age more Chi­nese visi­tors to the UK. He also says that the coun­try’s con­nec­tiv­ity with China is im­prov­ing, as demon­strated by Bri­tish Air­ways’ new di­rect flight to Chengdu.

He says the lack of knowl­edge about in­vest­ment op­por­tu­ni­ties is a cru­cial rea­son why many po­ten­tial op­por­tu­ni­ties are still not re­al­ized.

“For cer­tain sec­tors in China, Bri­tain is well known as an in­vest­ment desti­na­tion. In oth­ers, there is lit­tle Chi­nese pres­ence, and peo­ple are wait­ing for the first movers. So when there are suc­cess­ful Chi­nese com­pa­nies, the oth­ers will fol­low,” he says.

CE­CILY LIU / CHINA DAILY

Nick Baird, CEO of UK Trade & In­vest­ment, says Chi­nese in­vest­ment in the UK helps bring cap­i­tal and job op­por­tu­ni­ties for the lo­cal econ­omy.

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