MCLC: Beijing investors flock to London

[Denton, Kirk]

MCLC LIST
From: kirk (denton.2 at osu.edu)
Subject: Beijing investors flock to London
***********************************************************

Source: The Guardian (7/28/12):
http://www.guardian.co.uk/business/2012/jul/29/beijing-investors-flock-to-l
ondon

Beijing's champion investors flock to London
In the wake of the Olympic torch have come some of China's biggest
companies, attracted by Britain's openness to foreign investment, and
buying up some very well-known names
By Julia Kollewe 

China blew previous Olympic hosts out of the water by pumping £20bn into
the Beijing Games, which memorably closed with the spectacle of fireworks
exploding in the shape of the interlocking rings.

The monster budget was a not-very-subtle display of China's financial
firepower. The striking bird's nest stadium, with its ribbons of steel,
was a symbol of the huge country's economic prowess. And though the
Olympic cauldron may now be burning in east London, Beijing is still
flexing its financial muscles.

On Friday senior UK government ministers courted Chinese industrialists at
a summit in the capital as the coalition desperately tries to pull in
overseas investors to Britain.

China is already the second-largest overseas investor in London, and the
third biggest in the UK as a whole. It has the outspoken backing of the UK
government: on a trip to the world's second-largest economy in January,
George Osborne encouraged investors there to put money into British
transport, energy and utility projects.

Three days later, China Investment Corporation
<http://www.china-inv.cn/cicen/> (CIC), the country's sovereign wealth
fund, bought a 9% stake in Thames Water. And a few days ago, Wales & West
Utilities <http://www.wwutilities.co.uk/>, the company that operates
Wales's gas infrastructure, was sold to a Chinese consortium in a £645m
deal. Chinese oil enterprises have also just bought two North Sea oil
fields in one day, albeit from Canadian companies: China's top refiner,
Sinopec, acquired a $1.5bn stake in the North Sea operations of Talisman,
while the China National Offshore Oil Corporation splashed out $15bn on
Nexen.

The deep-pocketed Chinese are now the power behind the throne of British
companies ranging from Thames Water and Scotland's biggest mainland oil
refinery, Grangemouth, to Weetabix, bespoke suitmaker Gieves & Hawkes,
Harvey Nichols and Pringle.

The UK drew the line when the privately-owned telecoms group Huawei
offered to pay for mobile phone coverage on the underground as a gift
between Olympic nations, but it is already BT's strategic partner in
developing the national broadband network in Britain and on Friday
promised to create 200 new UK jobs. Its chairman, Sun Yafang, praised the
UK's "free and open market" and "efficient, supportive and transparent
government".

All that cash comes from one pool of money: China's massive stockpile of
foreign exchange reserves, worth about £2tn at present, says Aman Wang,
the London-based head of KPMG's global China practice. Most of the funds
flow to CIC and the state administration of foreign exchange, an arm of
China's central bank.

The UK continues to attract more foreign investment than any other
European country, creating more than 112,000 jobs in the last year, a near
20% increase on the previous year, business secretary Vince Cable
announced last week. So what gives Britain the edge? Wang cites the
flexible labour market vis-a-vis countries like Germany and France, a
wealth of senior managerial staff and financial talent, a benign tax
regime and high-end manufacturing expertise in areas such as aviation.

"Politically it's a relatively open environment for foreign investors," he
adds. "The UK government has done a reasonably good job promoting the
infrastructure sector at national level, and at state level Scotland and
Wales have been promoting themselves."

Just last week, it emerged that China also harbours ambitions to become a
major player in the UK energy industry
<http://www.guardian.co.uk/environment/2012/jul/20/china-uk-nuclear-power-p
lants> by building a series of new nuclear power stations. Two
Beijing-backed energy groups are in separate talks to buy the Horizon
consortium, which plans to build two UK reactors, from its German owners
E.ON and RWE.

China's companies are pushing forward globally: Chinese investment abroad
has swelled from an annual average of below $3bn before 2005 to more than
$60bn in 2010 and 2011, according to a recent report by consultancy
Rhodium Group, which specialises in China.

Garry Pass, managing director of NVC UK, a wholly owned subsidiary of
China's largest lighting company, says: "We welcome people here a lot more
than other European countries."

The company is supplying lighting to the 2012 Olympics, having started
from a London office in 2009 with a sales force of 10 and two designers.

Sales were £6,000 then. That figure ballooned to £2m by May 2012. And now
the firm is plotting its expansion into mainland Europe, using Britain as
a base – a common strategy.

• This article was amended on 30 July 2012. The original referred to
Huawei as state-owned. This has been corrected.