China-UK ‘Golden Era’ on fast track

Sharing a pint of ale and fish and chips at an English country pub is the image often used to mark the start of President Xi Jinping and former UK prime minister David Cameron’s “Golden Era” in China-UK relations.

But another picture may be just as telling. In September 2015, one month before Xi’s state visit to Britain, then-chancellor George Osborne was photographed aboard a 350-kph bullet train in Chengdu, Sichuan province, where he was wooing Chinese investment in planned high-speed rail lines in the United Kingdom.

The UK, which has a hefty current account deficit and expensive infrastructure plans, is eager for Chinese money.

Chinese investments and contracts in Britain totaled $38 billion in the past 10 years, making the UK China’s top investment destination in Europe, according to the American Enterprise Institute’s China Global Investment tracker.

It was Xi’s visit, though, that encouraged a wave of Chinese investment, which has subsequently been underlined by commitments from both sides.

Political analysts emphasized that any doubts about Britain’s continuing commitment to the relationship under Prime Minister Theresa May were swept away by her positive remarks and the halfhour private meeting she had with Xi at the G20 summit in October.

The EU Commission estimates that Europe as a whole received more than 27 billion euros ($29.2 billion) of investment from China last year, compared with 23 billion euros in 2015.

From 2015 to August last year, China was the UK’s second-largest source of investment projects with 156 — behind the US with 570 and

ahead of India with 140, according to the UK’s Department for International Trade.

Angus Knowles-Cutler, China Services Group chairman for Deloitte, said the depreciation of the pound following Britain’s vote in June to leave the European Union has led to increased interest in the United Kingdom among Chinese investors.

“The Chinese see the UK as being the most open for business among major economies in the world,” he added.

There were several major deals involving Chinese companies last year, including the 6 billion pound sale of a 30 percent stake in the Hinkley Point C nuclear power project to China General Nuclear; the 1.4 billion pound sale of Edinburgh-based flight comparison website Skyscanner to Chinese travel company Ctrip; and the 13.8 billion pound sale of a 61 percent majority stake in National Grid’s gas pipe network to a group of investors including China Investment Corp.

For Chinese investors, Britain’s stable regulatory system, rule of law and connectivity form part of its allure — particularly in property, which makes up just under a third of all investment since 2006.

Richard Marshall, senior infrastructure analyst at BMI Research, said regional infrastructure is a priority for the new UK government, and the sector remains attractive to Chinese investors after the Brexit vote.

“There was an added benefit of targeting the UK when it was part of the EU, but the case for targeting the UK alone is still very strong, given that its infrastructure sector is much more active than anywhere else in Europe,” Marshall said.

London’s role as a global financial hub continues to reap rewards from China for the UK. Three of Bank of China’s subsidiaries were among the 16 fastest-growing Chinese State-owned enterprises operating in the UK last year.

The US became the largest recipient of Chinese outbound foreign direct investment last year, with $45.6 billion worth of completed acquisitions and greenfield investment, according to research company Rhodium Group.

However, the company warned that a similar level of investment this year is unlikely, since recent appointments by US President Donald Trump suggest a more confrontational approach to trade and investment policy toward China.