Connectivity Enhances China-u.k. Trade Ties
The connectivity in infrastructure, rules, and standards as well as financial integration between China and the U.K. are bonding the two economies even much closer.
ON May 25, the Office for National Statistics of the U.K. released the import and export statistics for the first quarter of 2021. It showed that China had replaced Germany as the U.K.’S biggest single import market for the first time on record. Since the start of 2018, the value of goods imported from China to the U.K. increased by 65.6 percent to £ 16.9 billion (approximately RMB 153.3 billion) in the first quarter of 2021; over the same period, U.K.’S imports from Germany fell by a quarter to £ 12.5 billion (approximately RMB 113.4 billion).
All Aboard the China-to-london Freight Train
Under the framework of the Belt and Road Initiative (BRI), China and the U.K. – two highly complementary economies – have seen a steady increase in bilateral economic and trade cooperation, and Chinese cities such as Yiwu, Chengdu, Xi’an, and Wuhan have successively launched China-to-london freight trains. Strictly speaking, these trains are different from the China-european Railway Express, since all the cargo is transported by rail to a port on the European continent, and then transferred to a ship to be delivered to a British port across the English Channel.
On July 1 this year, the China-europe Railway Express Chang’an (Xi’an-immingham), set off from Xi’an International Port Station westward to the port of Alashankou in Xinjiang, where the train crossed the border, passed through Central Asia and Eastern European countries, and arrived at Kaliningrad, a city in the westernmost region of Russia. There all the cargo was transferred to a ferry and shipped to the port of Immingham in the U.K. The whole journey covered approximately 11,316 kilometers and took about 16 days.
“The Xi’an-immingham line has so far been the fastest China-europe railway service to reach the U.K.,” said Yuan Xiaojun, general manager of Xi’an Free Trade Port Construction & Operation Co., Ltd. According to Yuan, one outbound train leaves for Immingham every week, and this number will be increased to two or three outbound trips with one or two return trips per week. “On this line the cargo is unloaded at Kaliningrad rather than the congested Polish port, saving much time and costs, and it also meets the requirement of cross-border e-commerce customers who expect a rapid delivery,” Yuan added.
Chinese exports to the U.K. include a wide variety of goods from daily household supplies, electronic and mechanical products, to medical supplies. Since the outbreak of the pandemic, there has been a sharp growth of personal protective equipment such as face masks.
Meanwhile, there has been an escalating demand for British goods on the Chinese market, from the products with comparative advantages such as wine, cosmetics, and auto parts, to the worldleading brands in agriculture and food. At the third China International Import Expo held in Shanghai in 2020, a delegation consisting of more than 120 British companies showcased their products. John Edwards, the British trade envoy to China, attended the opening ceremony of the expo and shared at a press briefing a series of statistics, “Over the past five years, British food and beverages that were exported to China have experienced a growth of 200 percent. We are expecting they will maintain an annual growth rate of 25 percent during the upcoming years.”
Unified Standards Promote Intelligent Collaboration
If the “hard connectivity” of infrastructure can help countries integrate into the global supply chain, industrial chain, and value chain, and share development opportunities, then the “soft connectivity” of rules and standards can lead to unimpeded trade, financial integration, people-to-people bonds, and policy communication.
Imagine how a screw made in China can be precisely screwed into a skyscraper built in the U.K. The “perfect matching” requires unified standards in production. As early as 2013, China and the U.K. signed an agreement on the mutual recognition of voluntary standards for business and industry, which aims to promote market connectivity by simplifying trade procedures and reducing trade costs. Then in July 2016, Standardization Administration of China (SAC) and British Standards Institution (BSI) signed an agreement on the framework of the China-u.k. smart city standardization cooperation.
“In 2017, the two parties jointly published a white paper on smart cities, a brochure for smart city standardization, as well as the implementation process for information services, designs, and a management framework of building a smart community,” said Dai Hong, director of the industrial standards division II of SAC, at the China-u.k. Standardization Cooperation Commission Meeting held in Hangzhou, Zhejiang Province, on April 10, 2018. She then indicated, “Next, we will make efforts to discover more potential areas and carry out more standardization cooperation in smart healthcare and smart transpor
The “soft connectivity” of rules and standards can lead to unimpeded trade, financial integration, people-to-people bonds, and policy communication.
tation, providing strong support for China and the U.K. to lead the construction of global smart cities through standards connectivity.”
“The Standardization Law of the People’s Republic of China came into effect on January 1, 2018. It integrates China’s standards system into the world’s standards system, which is conducive to promoting healthy economic development,” said BSI’S Director of Standards Scott Steedman. He likened the international standards to a tie that links the world, and pointed out that most of the current international standards came from BSI. “China and the U.K. have had close ties and played a vital role in the field of standardization. Just as China’s BRI proposal has brought benefits to China, it will benefit the rest of the world. We hope that more standardization cooperation can be implemented in the countries along the routes of the BRI,” said Steidman.
Financial Integration Fuels Economic Recovery
Financial integration is another major part of connectivity. The establishment of a long-term, stable, sustainable, and risk-controllable diversified financing system can provide a solid guarantee for the sustainable development of the global economy.
The financial cooperation between China and the U.K. has been the highlight of the bilateral pragmatic cooperation in the last few years. On June 17, 2019, during the 10th China-u.k. Economic and Financial Dialogue, the two countries officially launched the “Shanghai-london Stock Connect,” which allows eligible companies listed in each market to issue depository receipts (DRS) on the other exchange. In his speech delivered on June 28, 2021 at the online Exhibition of Achievements of Chinese Enterprises in the U.K., Chinese Ambassador to the U.K. Zheng Zeguang pointed out, “Four Chinese firms are listed in London through the Shanghai-london Stock Connect, which enabled the first-ever connection between the Chinese capital market and a foreign one.” Ambassador Zheng then added, “In recent years, eight Chinese banks opened branches in the U.K. London is now the world’s largest offshore RMB trading center and second largest offshore RMB clearing center, with the total clearing volume exceeding RMB 55 trillion.”
At the 9th and 10th China-u.k. Economic and Financial Dialogues, in 2017 and 2019 respectively, the governments of both countries reached a number of consensuses in the field of green finance, including strengthening further cooperation on the BRI, information disclosure, green standards, green securitization and capacity building, as well as environmental, social, and governance (ESG) responsibilities for company’s operations. In 2018, the U.k.-china Green Finance Taskforce issued the Green Investment Principles (GIP), which aims to integrate low-carbon and sustainable development issues into the BRI construction.
The U.k.-china Green Finance Center (UKCGFC), established in 2018, has also been recognized by the governments of both countries. Sir Roger Gifford, the late co-chairman of the center, said last June, “The U.K. and China have been leading the world in green finance in recent years. At this critical moment in history when the global economy is gradually recovering from the epidemic, we should do our best to continually promote the development of green finance and design a sustainable path for economic recovery.”
“We have seen China’s ability to promote global change in the field of green finance. China’s green bond market is developing very rapidly, and many Chinese banks have issued green bonds on the London Stock Exchange,” said Kunal Khatri, former minister counsellor and director of Financial and Professional Services of the U.K.’S Department for International Trade (DIT) in early 2020. He pointed out that in 2021, China will host the United Nations biodiversity convention meetings in Kunming, Yunnan Province, and the U.K. will host the 26th United Nations Climate Change Conference of the Parties (COP26) in Glasgow. “This is a critical opportunity for the U.K. and China to demonstrate joint leadership, promote environmental protection, and support the global transition to a green economy. Sustainable development will be the main trend during the next decade, and it will bring huge opportunities for us as two great leaders in the collaboration on green finance,” he said.
The establishment of a long-term, stable, sustainable, and riskcontrollable diversified financing system can provide a solid guarantee for the sustainable development of the global economy.