Investment on a high, with mergers and acquisitions taking figure to above $7 billion

Trade between China and the United Kingdom reached $80.9 billion (78.4 billion euros) in 2014, a record high, a Chinese senior diplomat says.

"The year 2014 was marked by enhanced China-UK economic cooperation, with bilateral trade up 15.3 percent from the previous year," says Jin Xu, minister counselor of the economic and commercial office of China's embassy in Britain. "The rise in 2014 trade was the fastest among European countries."

Jin Xu, center, minister counselor of the economic and commercial office of the Chinese embassy in London and Ji Tao, left, chief editor of China Daily Europe, with Simon Bevan, partner of Grant Thornton UK, at the Tou Ying 2014 Top 25 tracker ceremony in London on Jan 15. Jiang Shan / China Daily

The container ship CSCL Globe, on its maiden voyage, docked at Felixstowe, England, this month. The vessel, owned by China Shipping Container Line, is the first of five similar sized vessels that will sail the Asia-Europe trade route. Provided to China Daily

From 2009 to 2014, trade between China and the UK doubled, growing from $39.1 billion to $80.9 billion. The UK is China's second-largest trading partner in the European Union. The 2015 target for trade is $100 billion.

"The portion of trade that involved vehicles, aviation and communications expanded last year and China became Britain's largest supplier of electro-mechanical products," Jin says. "China also surpassed the UK to become Jaguar Land Rover's largest market."

China's investment in the UK last year also grew strongly and several key mergers and acquisitions, with Chinese investment in the UK exceeding $7 billion in 2014, Jin says.

In April, Sanpower Group Ltd of Nanjing, owner of the Nanjing Xinjiekou department store chain, agreed to take control of retailer House of Fraser in a deal valuing the company at more than 450 million pounds ($745 million; 587 million euros) that included 250 million pounds of debt. It was the biggest international retail acquisition by a Chinese company.

In July, Beijing-based Hony Capital bought PizzaExpress, the British restaurant chain, for about 900 million pounds. Hony Capital is a China-focused, middle-market private equity firm backed by Legend Holdings.

Reignwood Investments, a Chinese international investment group, bought Wentworth Golf Club of UK for 135 million pounds in September.

"Infrastructure, property, research and development centers, advanced manufacturing and retail are popular sectors for Chinese companies investing in the UK," Jin says.

China Life Insurance Co, the country's largest insurer, together with Qatar Holding LLC, bought a building in London's Canary Wharf for 795 million pounds in June.

The same month, China Construction Bank Corp bought a central London office building off-market for about 110 million pounds.

And in September, Huawei Technologies Co Ltd acquired the UK's Neul, which specializes in the Internet of Things.

Chinese car maker Zhejiang Geely Holding Group acquired British electric-vehicle startup Emerald Automotive and committed to investing a minimum of $200 million over the next five years to develop Emerald's range of electric vehicles.

Cumulative investment by Chinese companies in the UK exceeded $40 billion by the end of last year, making the UK the largest recipient of Chinese investment in the EU.

According to the Tou Ying 2014 Top 25 tracker produced by accounting firm Grant Thornton and China Daily, the 25 fastest growing Chinese companies in the UK have generated 38 percent growth overall. Their combined turnover exceeded 25 billion pounds, and together they employ about 4,000. In Chinese, tou ying means "investing in the UK".

According to statistics by UK Trade & Investment, a national government department, China is the top job creator in the UK among developing countries.

"Chinese companies add a significant contribution to the UK economy through growth and employment," Jin said in his keynote speech at the Tou Ying 2014 Top 25 tracker ceremony held on Jan 15 in London.

When Premier Li Keqiang visited the UK in June, the two countries stressed the importance of mutual investment in promoting long-term economic growth and employment. Britain has welcomed Chinese investment in infrastructure such as transport and energy, particularly nuclear, high-speed rail, offshore wind power and photovoltaic projects.

Since the visit, two Chinese nuclear power companies reached an agreement to invest in the UK's first nuclear power stations in two decades.

The two planned reactors are at Hinkley Point C in Somerset. Led by EDF Group of France, the reactors will cost 14 billion pounds, and are slated to begin operations in 2023.

China General Nuclear Power Group and China National Nuclear Corp 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.

China also plans to utilize its high-speed railway technology to tap into the UK rail sector, although there currently are no immediate opportunities.

Jin says Chinese firms are eyeing one major British venture, High Speed 2. The British high-speed rail project will link London with the English Midlands and North England cities. Construction for the first phase of the project is set to begin in 2017 with an expected opening date of 2026.

One reason why China will continue to see trade with the UK grow lies in their banking bonds.

"China-UK financial ties were strengthened last year as China's Construction Bank Corp was designated as the first Chinese bank to provide yuan-clearing services in the UK, and the UK government issued a sovereign bond in yuan, becoming the first Western country to do so," Jin says.

Another major achievement in the banking sector occurred in September when China's largest commercial bank, the Industrial and Commercial Bank of China, received a license to open a branch in London. ICBC is the first Chinese mainland bank to open a branch in Britain since 1949.

China's Construction Bank Corp was granted a license in December to set up a branch in London.

There were also reciprocal deals to open up financial markets between the two countries, with Lloyd's of London getting the approval to establish a branch in Beijing.

"China's economic transformation and creative development strategy will not only boost its own growth but also offer greater opportunities for China-UK economic cooperation," Jin says.

The UK is ideal for helping Chinese companies to boost their internationalization, brand development 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 and it is a gateway for China to increase trade and investment with Europe and the world."

Fu Xiaolan, director of Technology and Management Center for Development at Oxford University, says Chinese investment in the UK will continue to grow.

"The British government's policies have been more open."

The British economy and the country's policymakers are more accepting of Chinese overseas direct investment, Fu says.

"They are more open in the service sector, in the manufacturing and high-tech sectors, in real estate and in infrastructure, such as high-speed railway and nuclear power stations."

zhangchunyan@chinadaily.com.cn

( China Daily European Weekly 01/23/2015 page20)