Buying into Britain

This interesting article by Chen Dujuan of Global Times on September 15th, 2013 shows the milestone of Chinese investment in Great Britain.

Two years ago, the BBC made a TV documentary called "The Chinese are coming," focusing on growing Chinese investment in Africa and South America. Now, the Chinese are coming again, but this time to the home country of the BBC: Britain.

Many of the country's well-known brands have been either wholly acquired or bought into by Chinese firms, including Weetabix, Thames Water and Heathrow Airport.

"There are around 500 Chinese companies currently investing in Britain and taking advantage of the world's most open investment environment. We welcome more," Daniel Carvalho, China marketing and communications manager with the UK Trade & Investment Office at the British Embassy in Beijing, told the Global Times on Tuesday.

"I think we're seeing the beginning of a very strong trend of Chinese investment into the UK," Carvalho said.

Chinese investment in Britain reached $8 billion in 2012, more than the total from 2009 to 2011, with domestic firms expanding into areas such as high-end manufacturing, infrastructure and research, the Chinese Embassy in London said in January.

From the beginning of 2013 to early August, China has invested more than $2 billion yuan in the country, Zhou Xiaoming, minister counselor for commerce at the Chinese Embassy in Britain, was quoted as saying by the 21st Century Business Herald on August 10.

Zhou said that Chinese firms will announce new infrastructure investment worth hundreds of millions of pounds in Britain in September, the report said.

Desirable sectors 
China has made breakthroughs in infrastructure investment in Britain in recent years, partly due to local preferential policies.

In 2012, China's sovereign wealth fund China Investment Corp bought an 8.68 percent stake in Kemble, which controls Thames Water, and acquired a 10 percent stake in Heathrow Airport.

Gingko Tree Investment Ltd, a fund wholly owned by China's State Administration of Foreign Exchange, also invested in a British water utility company last year.

Companies owned by Hong Kong billionaire Li Ka-shing control 30 percent of Britain's power supply, as well as 25 percent of its natural gas and 7 percent of the water supply.

Property is another new area of interest for Chinese investors.

In July, Ping An Insurance Group bought London's landmark Lloyd's building for 260 million pounds ($411 million). 

Dalian Wanda Group in June spent around 700 million pounds to develop a real estate project in London, including two apartment buildings and a five-star luxury Wanda hotel.

In May, Beijing-based property developer Advanced Business Park signed a $1.5 billion deal with London's city government to develop Royal Albert Dock.

Wang Jianlin, chairman of Dalian Wanda, told the Beijing News in June that the real estate project is "a big bargain for Wanda," which partly explains these firms' enthusiasm for property in Britain.

The land price for the project is much cheaper than in Beijing, and the sales revenue will be far more than the investment costs, Wang said.

Frank Chen, head of research at the China office of commercial property services company CBRE, told the Global Times Tuesday that the amount of high-quality property available for investment in Asia Pacific is still limited compared with North America and Europe, so Chinese investors are expected to focus on property in gateway cities that are capable of generating reliably stable returns on investment.

Chinese companies have also shown interest in buying high-end manufacturing brands in Britain and setting up R&D centers there.

Wanda acquired a 91.81 percent stake in British yacht maker Sunseeker in June and Chinese automaker Geely bought black cab manufacturer Manganese Bronze in February.

Companies including Shanghai Automobile and Huawei Technologies have set up or expanded research centers in the country.

Local benefits
"The British economy is growing again after several years of stagnation, so the timing is right for Chinese investors," Qing Wang, professor of marketing and innovation at Warwick Business School in Britain, told the Global Times Wednesday.

She said that Britain's sound legal system and open economy as well as the status of London as an international finance and services center make the country an attractive destination in Europe for Chinese investors.

Preferential policies are also playing an important role. Britain has chosen an "open door" philosophy to foreign investment in almost all of its industrial sectors, Michele Geraci, head of research at the Global Policy Institute, a think tank under the London Metropolitan University, told the Global Times Wednesday.

"We want to be the destination for Chinese investment. Tell other Chinese investors to come to London and spend their money," British Prime Minister David Cameron told Fortune magazine in May.

Chinese companies will be made to feel welcome, and will receive the full support of the British government, the British Embassy's Carvalho said.

A competitive tax regime and highly skilled workers are Britain's other advantages, Carvalho said. "We have hundreds of billions of foreign investment in Britain, so we're used to it. It's how our economy works - we accept investment from overseas, and we also make huge investments around the world ourselves," he noted.

Wang said that both governments have set a target to boost bilateral trade, and that the two countries can combine complementary assets and competencies, offering huge potential for Chinese firms investing in Britain.

Foreign owners welcome
Qing Wang and Michele Geraci both agreed that British people are not too concerned about local firms being bought by foreign investors, so long as it brings more employment to the country.

Chinese companies that wish to invest in the UK should be prepared to be more transparent about their shareholding structure, so that the sellers know exactly who is buying their assets, Geraci said.

Carvalho suggested that foreign investors should have "a PR strategy to engage with the UK media and local communities to build trust and gain confidence." The British Embassy can offer advice on this, he noted.

It is important that Chinese firms understand and abide by the rules and regulations of the British legal and economic system, Wang said, expressing the hope that Chinese firms can develop innovative products and global brands through investing in Britain.

Zhou with the Chinese Embassy in Britain suggested that Chinese firms could take advantage of the innovative advantages in Britain and cultivate their brands there, the 21st Century Business Herald report said.

Zhou said that the eurozone crisis has offered advantageous timing for Chinese companies, which can depend upon Britain's status as an international center and its open environment to expand into the international market, according to the report.

Article Source: http://www.globaltimes.cn/content/811462.shtml#.UjZiRT_tYh8