Revealed: City’s plan to woo Chinese firms
Britain launches bid to cash in on trade war with US – and deliver Brexit boost
CITY bosses have drawn up a plan to woo Chinese giants after Brexit and transform London into the ‘prime international location’ for Beijing firms to list their shares, The Mail on Sunday can reveal.
Policymakers at the City of London Corporation – the body representing the interests of banks, insurers and other organisations in the Square Mile – believe there is an ‘urgent need’ to enhance relations with China and attract new financial services i nvestment after t he UK leaves the European Union.
Documents seen by this newspaper say London is well placed to take advantage of the trade war with the United States, which has seen President Donald Trump threaten a crackdown on Chinese firms listing on its markets.
The City’s blueprint sets out plans to encourage Chinese firms to create more jobs in London, establ i sh the capital as a ‘major offshore centre’ for the renminbi currency and persuade Beijing investors to put their money into the UK rather than the United States or Hong Kong.
The plans may cause controversy in the City where Chinese share sales have been out of favour in recent years. In 2015, the London Stock Exchange (LSE) launched a clampdown on the management standards of listed Chinese firms following a series of scandals which led to 13 small firms leaving the market in 18 months.
Business relations between the UK and China have also been under strain since security concerns were raised over Chinese technology giant Huawei’s involvement in Britain’s broadband network. And last week, the Hong Kong Stock Exchange withdrew its takeover pursuit of the LSE after political pressure.
The latest plans have emerged at a critical time for the City, the hub of the UK’s financial services sector. According to a parliamentary report, 1.1 million people work in the UK’s financial services industry, which contributed £132 billion to the UK economy, equal to 6.9 per cent of total economic output.
But there are fears for the sector post-Brexit. Accountancy giant EY last month suggested that 1,000 financial services jobs have already been switched from London to rival European cities and another 7,000 could be moved in the ‘ near future’. Other reports – some of which have been dismissed by Brexit supporters as part of ‘ Project Fear’ – have claimed that more than 100,000 jobs could be lost i n the l ong run. Friction between China’s President Xi Jinping and Trump has also intensified over the past year.
In its report, the City of London says Trump’s threat to delist Chinese firms from US stock exchanges could present an opportunity to attract firms seeking to sell their shares.
‘ Chinese companies have become more cautious about using the US markets to raise capital because of the trade war,’ the report said. ‘ This presents an additional opportunity for London to be considered a prime international location for Chinese IPOs [initial public offerings].’
The report – drawn up by City of London Corporation policymakers and due to be approved as a new strategy by the body’s leaders at a meeting this Thursday – notes the issues facing China such as the US trade war, ‘political turmoil’ in Hong Kong and slowing export trade. But it added: ‘The Chinese government is cutting taxes, easing restrictions on cross-border money flows and accelerating the opening-up of its financial and capital markets.’
The report’s authors believe this will create ‘a tremendous opportunity for the City and global asset managers’. They added: ‘Focus for the next 12 months is to encourage Chinese institutional investors such as pension funds and insurance companies to expand their use of London as a platform for global asset allocation.’
A division of the corporation, Innovation and Growth, is developing a campaign with the aim of promoting the use of London as a prime platform to help Chinese investors with their global asset allocation. The scheme launches this month.
Around 35 major Chinese financial institutions already have subsidiaries or large offices in London, employing 3,500 people. The report says China is a ‘top tier priority market’ to target for new business at a ‘crucial time’ as Brexit approaches.
The LSE is a key cog in Britain’s relationship with Beijing. The Corporation says 113 ‘dim sum bonds’ – investment assets denominated in China’s renminbi currency – are now listed on the LSE.
And in June, the LSE and Shanghai Stock Exchange announced a new tie-up which makes it easier for UK investors to access the Chinese market and vice versa.