British Chancellor George Osborne’s recent visit to China was aimed at promoting Chinese investment in the United Kingdom and he promised to reduce financial trade barriers.
The Chancellor hopes that this will encourage Chinese banks to perform more transactions and expand in Britain. His plan is to make London the main centre for Chinese financial business overseas as “a home of Chinese banks, Chinese bonds and Chinese finance”.
London is already the main location overseas trading China’s currency, the yuan renminbi, with average daily trade worth $5.3 trillion. At the moment, only the Bank of China operates as a branch in London, but Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank China (ABC) and Bank of Communications hope to open branches in London in the near future.
Osborne’s further changes to policy will allow investors in London to buy onshore assets under the Renminbi Qualified Foreign Institutional Investor Scheme. This would mean that the UK would join Hong Kong and Taiwan as the only regions that permit offshore renminbi investment. On top of this, renminbi transactions will no longer have to go through China if Chinese banks receive authorization in London. This would lead to an expansion of Chinese business and investments in London.
During Osborne’s visit to China, a Chinese plan was announced to invest in Manchester Airport. The deal will be signed by the Industrial and Commercial Bank of China, and will involve further developing the business district at Manchester airport through building shops, offices and parkland. This could lead to 16,000 new jobs in Manchester, a significant contribution to the still fragile British job market.
Besides George Osborne, London Mayor Boris Johnson went on a separate visit to China to meet political and business leaders and to promote London’s trade with China, hoping thereby to improve diplomatic relations. Economic ties between the two nations have expanded, as the UK receives an increasingly large share of outward investment from China. In total, China invested nearly $130 billion in the entire world last year, with $14.7 billion going towards the UK, compared to $8.3 billion to France and $8.2 billion to Switzerland.
On top of this, many British companies are controlled by Chinese conglomerates with the Wanda conglomerate owning 92% of Sunseeker boats and Geely Automobile owning Manganese Bronze, the company that produces London’s taxis. China also holds a large amount of shares in Barclays, BP, Weetabix, Talisman Energy, Apax Parters Thames Water, and other companies.
These changes in the economic relations between China and the United Kingdom are positive, and will improve the overall relationship between the two countries. Previously, Chinese political leaders have accused London’s financial regulators of making it difficult for Chinese banks to expand in London. Last Monday, Osborne announced a simplification of the application process for Chinese tourists wanting to visit to UK while in Europe, as a gesture of goodwill.
