A history of Chinese involvement in UK infrastructure

Did you know that bilateral and business relations between China and the UK date back almost four hundred years to the 17th century?

That’s the time when a young Jesuit monk from Nanking in China arrived at the court of James II in England.

And thus began a new chapter in British-Chinese relations or Sino-British relations.

In the last five hundred years, both diplomatic as well as business relations between the Chinese dragon and The Union Jack have been a roller coaster ride.

The 18th century saw the growth of the East India Company. It tried to spread its wings in China. However, was defeated by the Ming and was forced to leave China. During the 19th century, the Anglo-Chinese relations were further strained due to the First and Second Opium War. The end of the Opium Wars resulted in the cessation of Hong Kong Island to the British. This, and the opening of a Chinese Legation in London.

In the 20th century, British armed forces were supported by Chinese labour and the Chinese army during World War-I as well as World War-II. The end of World War-II led to a gradual improvement in Sino-British trade and political relations.

The New Millennium and the Turning of Investment Tables

The new millennium has seen a positive change in British-Chinese business relations. The 20th century had witnessed an influx of British investments in China. However, the turn of the century has seen a steady rise in Chinese investments in the United Kingdom.

The Paradigm Shift In China’s Investments

In the last couple of decades, Chinese commercial interests in UK and Europe have almost doubled. That’s due to:

• China’s entry into the WTO—World Trade Organization
• Euro debt crisis of 2008 that led to a lower exchange rate for the euro between 2008 and 2016
• Improvement in bilateral relations between UK and China
• Domestic reforms in China that have led to rapid increase in production capacities
• Rise in diplomatic tensions between the US and China under the Trump regime
• Stable and strong social and political environment in both China and UK

UK—Dream Destination for Chinese Companies

During the last five years, bilateral trade between China and the UK almost doubled. The years also saw an influx of Chinese investments of more than $25 billion in UK businesses and infrastructure projects.

According to recent studies, during 2019 the UK saw a significant rise in Chinese investments.

Chinese companies have invested more than $8 billion into the UK from January to August 2019. That’s 25% higher than the approximately $6 billion through 2018.

Other than the EU, and the US, China has emerged as the UK’s 3rd largest trade partner.

UK emerges as the top choice for Chinese companies—Why?

UK, and especially London, is one of the top preferences for Chinese companies looking for global growth. That’s because:

• Britain offers a positive and lucrative foreign investment policy to investors
• British technology companies are a great investment choice
• The strong legal framework in the UK provides a safeguard against frauds and business crimes
• The strategic geographical location between Asia and the US
• A well-trained and motivated workforce
• A global business environment with state-of-the-art business infrastructure
• Ease of commencing business including simple business incorporation processes and easy visa procedures
• Foreign exchange advantage of a weaker GBP during the Brexit crisis
• Open market economy of the UK that facilitates start-up investment as well as mergers and acquisitions.

Recent Chinese investment in the UK Infrastructure

Chinese investment in the UK focuses on different infrastructure-based industries. Examples include Energy, Airport Infrastructure, Telecommunications, Real Estate Development development, and Technology. Then, there are other industries like Finance, Food and Beverage, Hospitality, Retails, Media & Television, Sports, and Tourism to name a few.

Energy

• Chinese company China Resources Power (CR Power), which is one of China’s biggest state-supported corporations, plans to invest approximately£600 million to buy a 30 % stake in Dudgeon Offshore Wind Farm which is located off the coast of Norfolk in the UK.
• China General Nuclear Power, which is also a state-owned company owns a 33.5% stake in the Hinkley Point C which is the UK’s first nuclear plant since 1995 and is currently under construction in Somerset.
• Almost 1/4th of the UK’s North Sea oil production which is one of the UK’s largest oil fields is done with the help of China National Offshore Oil Corporation (CNOOC).

Telecommunications

• Chinese company Huawei has received requisite approvals and permissions to proceed with a $1.25 billion research facility in Cambridge, UK. This nine-acre research centre will focus on the fibre optic communication business and new chip design research is slated to create employment opportunities for approximately 400 people.
• In January’ 2020, the UK government had allowed telecom companies in the UK to use limited equipment from Huawei for its 5G technology. However, in recent developments, the UK government has put a ban on the usage of Huawei technology for 5G technology.

Transport:

• Hong Kong based MTR and First Group have acquired a major stake in one of UK’s largest commuter networks, South West Trains. MTR currently has almost a 30 % holding in South Western Railway, and also owns the franchise for the London Crossrail.
• The London Electric Vehicle Company, which produces London black cabs, is privately owned by a Chinese firm named Geely. Geely is also a majority stake holder in the premium sports car manufacturer Lotus.
• One of China’s largest wealth funds, China Investment Corporation (CIC), has purchased a 10% stake in Heathrow Airport Holdings’, the company that owns London’s Heathrow airport. The acquisition will also grant rights to the CIC for other UK airports like Southampton, Glasgow, and Aberdeen.
• Another Chinese company, the Beijing Construction Engineering Group (BCEG) shall be investing a whopping £800 million for the redevelopment of Manchester airport as the UK’s second-largest airport.

President Xi Jinping’s “Chinese Dream” of China becoming a completely developed nation by 2049 has fuelled optimistic foreign investment growth of Chinese companies in foreign ventures, especially Great Britain.

With China expected to invest £105bn in British infrastructure by the year 2025, sectors like energy, telecommunications, and transport in the UK stand to benefit the most.