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An envoy champions UK China relations [China Daily: Hong Kong Edition](China Daily: Hong Kong Edition Via Acquire Media NewsEdge) Zhou Xiaoming, minister counselor with the economic and commercial office at the Chinese embassy. [Photo by Cecily Liu / chinadaily.com.cn] Trade and Investment links between China and the UK have become ever closer over the past five years, and observing these transformations first-handedly is Zhou Xiaoming, minister counselor with the economic and commercial office at the Chinese embassy. Zhou, who assumed his current office in December 2010, has actively helped to push forward cooperation between the two countries in strategically important sectors such as financial services and nuclear power, as well as between individual companies in all sectors. Lord James Sassoon, chairman of the China Britain Business Council, has called Zhou "the UK's best salesman" on several occasions, and Zhou says he is not reluctant to accept the title. "I am a salesman for the UK because I believe this country has a lot to offer for China, and at the same time China's support and partnership can also help the UK grow," Zhou says, sitting in his central London office near Hyde Park. The latest Chinese government statistics shows China UK trade in September totaled $7.4 billion, representing a 17.1 percent increase, compared to a 12.5 percent increase for China EU trade. From 2009 to 2013, bilateral trade between China and the UK grew from $39.1 billion to $69.9 billion, representing a 78.7 percent increase. Over the same period China EU trade grew by 37.2 percent. China's investments and acquisitions in Britain last year were worth more than $3 billion, with big deals involving well-known brands, infrastructure, media, research and property development. Recent investments have included $2 billion by the developer Greenland in two London property projects, ZhongRong Group's 500 million pound ($840 million) plans to redevelop Crystal Palace, and Sanpower's 480 million pound purchase of a majority stake in the department store chain House of Fraser. Zhou says Chinese investment in the UK has significantly widened in scale and range of sectors over the years. Of particular significance is China's investment in the UK's infrastructure, banking, property and brands. In 2012, China Investment Corp, the country's sovereign wealth fund, bought a 8.68 percent stake in Thames Water Utilities Ltd and a 10 percent stake in Heathrow Airport Holdings, the company that runs London's Heathrow Airport. In 2011, China's Cheung Kong Infrastructure Holdings bought the UK utility company Northumbrian Water for 2.4 billion pounds. Zhou says these infrastructure investments demonstrate that the UK is very open for business, and this open attitude makes the UK a great springboard for Chinese investment into Europe in strategically important sectors like energy and infrastructure where Chinese investors can demonstrate their credibility in the UK first. One such area is nuclear power, in which sector Zhou has witnessed continuous effort by Chinese companies to invest in the UK in the past few years. Zhou Xiaoming (right) chairs a business seminar in North East England. [Photo by Cecily Liu / chinadaily.com.cn] In 2012, two Chinese nuclear companies formed consortiums with their respective partners to bid for the UK's Horizon nuclear programs, but unfortunately withdrew their intention before the bidding process finished. But Chinese companies' intention to enter the UK market did not end. Encouragingly, two Chinese nuclear power companies have reached an agreement to invest in the UK's first nuclear power stations in two decades, a milestone move that will demonstrate the strength of the Chinese nuclear industry in Western countries. The two planned reactors are at Hinkley Point C, in Somerset. Led by EDF Group of France, they will cost 14 billion pounds, and are due to start operating in 2023 if built on time and will run for 35 years. China General Nuclear Power Group and China National Nuclear Corporation are expected to have a combined 30 to 40 percent stake in the consortium, with Areva taking another 10 percent. Exact plans for cooperation at Hinkley Point C are expected after a European Commission decision on UK state aid for the project is made. Zhou is optimistic about the future of Chinese nuclear investment in the UK, saying that Chinese nuclear companies have great management skills to share with the UK's nuclear industry. "China is continuously building nuclear reactors so Chinese companies have the knowhow to finish projects on time and on budget. This skill is very valuable to the UK, because delaying nuclear projects can lead to escalating costs," Zhou says. Like nuclear power, China's high speed railway sector also has great technology and management expertise to share with the UK, although the time scale of the UK's high speed railway projects means Chinese companies are not seeing immediate entry opportunities just now, Zhou says. Known as High Speed 2, the British high speed railway is planned to link London with English Midlands and North England cities. Construction for phase one of the project is set to begin in 2017 with an indicated opening date of 2026. In the financial services sector, Zhou is relieved to see the significant growth of Chinese banks in London in recent years, and more so the UK government's support for Chinese banks to open branches in London. Since the financial crisis in 2008, Britain's financial services regulator, has made it difficult for foreign banks to set up branches in the country. Branches are offshore arms of foreign banks, so their lending and financing abilities are proportional to their parent companies' balance sheets. Subsidiaries, in contrast, are subject to the strict capital requirements that apply to Britain's local banks. "When I arrived in the UK in 2009 many Chinese banks explained to me that inability to establish branches is a big problem that restricts their growth," Zhou says. In subsequent years, Zhou helped to facilitate the dialogue between the two governments to help Chinese banks. "I explained to the UK regulator that Chinese banks greatly support the growth of Chinese investment into the UK, and as well they play a significant role in helping London to become a significant offshore renminbi center," Zhou says. Dou Tsang, sales and export coordinator at Ford Aerospace Ltd (right) with Zhou Xiaoming. [Photo by Cecily Liu / chinadaily.com.cn] With Zhou's help to understand the significant role of Chinese banks in London, the UK regulators reassessed the issue, and in 2013 British Chancellor George Osborne announced a regulatory change where foreign banks are allowed to open branches as long as their branch operation relate to wholesale activities. Several major Chinese banks applied for branch licenses subsequently and in September Industrial and Commercial Bank of China became the first Chinese bank to receive a branch license in the UK since the regulatory change. Zhou says ICBC's branch license signifies the British government's recognition for Chinese banks' important role in London, and he expects more branch licenses will be granted to other Chinese banks in the near future. Meanwhile, London's strong capital market has also provided great opportunity for Chinese companies to raise capital, as there are currently 60 Chinese companies listed on the London Stock Exchange, Zhou says. London is also a great financial market to support the renminbi's internationalization, he says. In September 2011, China's then Vice-Premier Wang Qishan endorsed the London private sector's initiatives to develop an offshore renminbi market in London. Since then, many renminbi products and initiatives have been launched in London, including a renminbi swap line established between the two countries' central banks and the appointment of a renminbi clearing bank in London. As a further demonstration of the UK government's initiative, Britain became the first Western country to announce the issuance of an offshore renminbi-denominated sovereign bond in September. In addition, there are 20 renminbi-listed bonds are sold in London, and they have raised a total of 15 billion yuan ($2.4 billion). Issuers include the Bank of China, European Bank for Reconstruction and Development, Lloyds Bank, HSBC and International Finance Corporation. Over the past five years, Zhou has also witnessed a growing number of Chinese acquisitions and is happy to see great post-acquisition integration between the parent and target companies happening for most deals. Zhou says a good example of Chinese investment and its market supporting British technology is the purchase by the Chinese company Zhuzhou CSR Times Electric of British company Dynex Semiconductor Ltd, of Lincolnshire, which specializes in a particular type of semiconductor technology. In 2008, Zhuzhou CSR Times Electric bought a 75 percent share in Dynex and retained Dynex's management board. With financial support from Zhuzhou CSR Times Electric, Dynex built a 12 million pound R&D center to focus on developing its semiconductor technology. "I went to Dynex in Lincolnshire and met the company's management team, which consisted mostly of British people who have worked at the company for years," Zhou says. "They are very excited about working with the Chinese owners, and they say Chinese investment has injected new life into the company." So impressed is Zhou with Dynex's growth model that he has been promoting such cooperation to many British businesses. Zhou says another example of acquisition leading to great synergy is Shandong Yongtai Chemical Group buying the British firm Covpress in 2013, in partnership with TIA Treadsetters Ltd, a firm that first started buying tires from Yongtai in 2003 to supply its European customers. The deal, which stood out as one of China's biggest investments in Britain, was valued at $45.3 million, with Yongtai taking a 70 percent stake and TIA the rest. Covpress, a globally renowned supplier of car body parts, already has customers ranging from Jaguar Land Rover Automotive Plc to Nissan Motor Co and Renault SA. The acquisition was helpful for Covpress as Yongtai can help it to continue selling tires to its existing customers as they start to manufacture in China. There are many other deals like the Dynex and Covpress stories. Zhou says he is optimistic about these acquisitions because they combine UK's technology and innovation with China's market and manufacturing strength to achieve win-win benefits. "British people are very innovative, and they come up with amazing designs. Those ideas and designs can potentially be commercialized, produced and sold on a large scale to bring down cost to generate great profit. "However, very often British companies do not have the capital to invest in this commercialization, and Britain's market is insufficient to accommodate increased production. But China has both capital and market." Looking into the future, Zhou is greatly optimistic about China UK trade and investment relationships, explaining that the UK is a great platform for Chinese companies' internationalization, brand building and innovation. "UK is an important partner for China, and the importance goes much more beyond its GDP. It can help China to move up the production chain, develop innovation and it is a gateway for China to increase bilateral trade and investment with Europe and the world." (c) 2014 China Daily Information Company. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info). |