George Osborne and Boris Johnson are courting investment, but it has to be a two-way street
George Osborne visiting the People’s Republic: forget about political issues, let alone human rights, and go for the money, is the message
Ever since China emerged as the world’s rising economic power, Western governments have been wrestling with how to approach the last major state on earth still ruled by a Communist party. George Osborne and Boris Johnson, visiting the People’s Republic this week, have demonstrated their answer: forget about political issues, let alone human rights, and go for the money. By all means, is their clear message, increase your already extensive investments in our country.
It is an approach that Beijing is very much in favour of, and the Osborne-Johnson trip has been crammed with smiling photo opportunities and expressions of goodwill – including Britain’s pledge of relaxed visa regulations for business visitors and tourists and a warm welcome for yet more Chinese students in London. In return, a flood of investment in Britain is promised – most welcome to a Government intent on ramping up growth.
Infrastructure and property head the shopping list, with the state-owned Commercial Bank (ICBC) due to put £650 million into a 150-acre business district at Manchester airport, which should generate 16,000 jobs over 15 years. But this is only the latest in a string of big development deals. The Ping An Insurance Group bought the Lloyd’s building in London this summer for £260 million, while the Beijing property developer Advanced Business Park recently signed a £1 billion deal to develop the Royal Albert Dock. The giant Wanda property group has acquired the former Nine Elms site on the River Thames in Wandsworth for £700 million, and plans a 660ft tower of luxury apartments, a 530ft five-star hotel, and a set of skyscrapers along the South Bank.
It is all part of a shift in the “going out” strategy adopted for China by the paramount leader, Deng Xiaoping, in 1978, after he won the power struggle that followed the death of Mao Tse-tung. In Deng’s day, “going out” meant exporting cheap goods to the world and then buying up the raw materials the People’s Republic needed to fuel its growth.
Now, the recipe is rather different. Exports are less important. Though China maintains a voracious appetite for raw materials from Africa, Australia, Latin America and the Gulf, it also wants to use its large cash reserves to buy into developed nations and sees Britain as an ideal destination. Some of the purchases are by state funds and banks; others by Chinese companies.
For example, Beijing’s state sovereign wealth fund, CIC, has used part of its £300 billion in assets to snap up 8.7 per cent of Thames Water. That is on top of its 10 per cent stake in Heathrow. If a new airport materialises in the Thames Estuary, Chinese investment will certainly be sought – not to mention for HS2, wind farms and a new sewer network for London.
MG Rover, Manganese Bronze (the black-cab maker) and the company that produces Weetabix are among other investments in the Chinese portfolio – though a bid for United Biscuits, home to Jaffa Cakes and McVitie’s digestives, failed. Wanda, the firm behind the Nine Elms project (which has annual revenues of £15 billion), has also purchased Sunseeker, the UK’s leading luxury yacht-maker. Its chairman, Wang Jianlin, celebrated on a stage shaped like a boat with a troupe of dancers in glittering dresses behind him. “We wanted to buy 30 Sunseeker yachts because we are planning to build three marinas here in China,” he explained. “So then we thought it would be a better deal if we just bought the company.”
In all, some 500 Chinese companies have invested in Britain, not counting certain long-standing Hong Kong firms that have been here since before the hand-over. The Chinese see Britain as being on a growth path, and value the legal standards here as well as the openness of our economy. Mr Osborne, keen to take advantage of this, has laid out plans for London to become the international centre for trading in the Chinese currency, the renminbi.
There are other explanations for China’s interest, of course. Some companies hemmed in by fierce competition and price controls at home think they can enjoy bigger profit margins by investing abroad. Others want to acquire technology, management and marketing expertise. For property firms, Britain is something of a bargain compared with the soaring price of land in big cities on the Chinese mainland – right now, according to Wanda, London is cheaper than Beijing.
Yet this week’s back-slapping cannot hide some more fundamental issues. For example, it is clear who is in the driving seat of the British-Chinese relationship: this current entente follows Beijing’s decision to remove Britain from the 18 months of purdah imposed after David Cameron and Nick Clegg met the Dalai Lama. However much Messrs Osborne and Johnson talk of China valuing Britain, the power is tilted very much Beijing’s way. And the exclusive focus on economics gives the impression that Britain has, in effect, given up seeking a meaningful political relationship with a regime that is going to play a growing global role. The Chinese have been allowed to set the parameters on the level of concern they will allow Britain, along with other foreign powers, to express about their human rights record, Tibet or other sensitive matters.
There also the question of how far we should let certain Chinese investments go. National security concerns have impeded the expansion of the telecommunications giant Huawei, given constant allegations – especially in the US – that it is connected with the Chinese military (which the company stoutly denies). And would involvement in nuclear power be a step too far? Also, how large a stake should state enterprises from the People’s Republic be allowed to build up in our key industrial sectors?
Then there is the issue of reciprocity. Having an open market is good for the inward investment Britain needs – but China, with its 1.3 billion population and relatively underdeveloped market, offers a huge opportunity for our businesses to invest in turn. Yet managers of British and other Western firms report increasing difficulty in operating freely, and recent crackdowns over alleged corruption have mainly targeted foreign enterprises.
Our politicians should not simply be relieved to be out of Beijing’s doghouse, as they welcome the rush of Chinese money. During their trip, the Chancellor and the Mayor need to press for British companies to have the kind of freedom to operate and expand in China that Chinese companies enjoy here. They must make clear that this relationship has to be a two-way street – if it is not already too late.
Jonathan Fenby is the author of 'Tiger Head, Snake Tails: China Today, How it Got There and Where it is Heading’ and 'The Penguin History of Modern China’
From: the Telegraph
For example, Beijing’s state sovereign wealth fund, CIC, has used part of its £300 billion in assets to snap up 8.7 per cent of Thames Water. That is on top of its 10 per cent stake in Heathrow. If a new airport materialises in the Thames Estuary, Chinese investment will certainly be sought – not to mention for HS2, wind farms and a new sewer network for London.
MG Rover, Manganese Bronze (the black-cab maker) and the company that produces Weetabix are among other investments in the Chinese portfolio – though a bid for United Biscuits, home to Jaffa Cakes and McVitie’s digestives, failed. Wanda, the firm behind the Nine Elms project (which has annual revenues of £15 billion), has also purchased Sunseeker, the UK’s leading luxury yacht-maker. Its chairman, Wang Jianlin, celebrated on a stage shaped like a boat with a troupe of dancers in glittering dresses behind him. “We wanted to buy 30 Sunseeker yachts because we are planning to build three marinas here in China,” he explained. “So then we thought it would be a better deal if we just bought the company.”
In all, some 500 Chinese companies have invested in Britain, not counting certain long-standing Hong Kong firms that have been here since before the hand-over. The Chinese see Britain as being on a growth path, and value the legal standards here as well as the openness of our economy. Mr Osborne, keen to take advantage of this, has laid out plans for London to become the international centre for trading in the Chinese currency, the renminbi.
There are other explanations for China’s interest, of course. Some companies hemmed in by fierce competition and price controls at home think they can enjoy bigger profit margins by investing abroad. Others want to acquire technology, management and marketing expertise. For property firms, Britain is something of a bargain compared with the soaring price of land in big cities on the Chinese mainland – right now, according to Wanda, London is cheaper than Beijing.
Yet this week’s back-slapping cannot hide some more fundamental issues. For example, it is clear who is in the driving seat of the British-Chinese relationship: this current entente follows Beijing’s decision to remove Britain from the 18 months of purdah imposed after David Cameron and Nick Clegg met the Dalai Lama. However much Messrs Osborne and Johnson talk of China valuing Britain, the power is tilted very much Beijing’s way. And the exclusive focus on economics gives the impression that Britain has, in effect, given up seeking a meaningful political relationship with a regime that is going to play a growing global role. The Chinese have been allowed to set the parameters on the level of concern they will allow Britain, along with other foreign powers, to express about their human rights record, Tibet or other sensitive matters.
There also the question of how far we should let certain Chinese investments go. National security concerns have impeded the expansion of the telecommunications giant Huawei, given constant allegations – especially in the US – that it is connected with the Chinese military (which the company stoutly denies). And would involvement in nuclear power be a step too far? Also, how large a stake should state enterprises from the People’s Republic be allowed to build up in our key industrial sectors?
Then there is the issue of reciprocity. Having an open market is good for the inward investment Britain needs – but China, with its 1.3 billion population and relatively underdeveloped market, offers a huge opportunity for our businesses to invest in turn. Yet managers of British and other Western firms report increasing difficulty in operating freely, and recent crackdowns over alleged corruption have mainly targeted foreign enterprises.
Our politicians should not simply be relieved to be out of Beijing’s doghouse, as they welcome the rush of Chinese money. During their trip, the Chancellor and the Mayor need to press for British companies to have the kind of freedom to operate and expand in China that Chinese companies enjoy here. They must make clear that this relationship has to be a two-way street – if it is not already too late.
Jonathan Fenby is the author of 'Tiger Head, Snake Tails: China Today, How it Got There and Where it is Heading’ and 'The Penguin History of Modern China’
From: the Telegraph
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