Speaking at the recent fifth Economic Financial Dialogue between the two countries, Chancellor George Osborne noted: "Britain and China are partners in growth [...]. It means more trade, more investment and more jobs. More jobs in Britain. More jobs in China. And from services to science, from infrastructure to innovation, we are working together and creating ties between our countries."
For some time Mr Osborne has had his sights set on making the UK the "home of Asian investment". This involves transforming the nation into a renminbi (RMB) trading hub and a base for firms looking to expand into European markets.
The recent dialogue between the UK and China has taken the British government a step closer to achieving its dreams.
Why China?
The changing Chinese economy is an opportunity for Britain, particularly because of its demand for goods and services where the UK is a global leader.
"Not every country in the world is happy to see foreign investment," Osborne explained at the Dialogue this month. "There are some countries, including some in Europe, who think the answer to the global race is to erect trade barriers and find all sorts of ways of making it clear that Chinese investment is not welcome. Britain isn’t one of those countries."
This has contributed to the UK's ability to buck the global trend and attract a 22% rise in investment coming from other countries.
For 2013 it is expected China's economy will grow by 7.5%, down slightly from last year's 7.8% increase. The World Bank's latest economic update noted this was the result of the shift from an export-orientated economy to a focus on domestic demand.
To capitalise on this growth, the UK has already positioned itself as an investment hub for China. A new project in London’s Royal Docks announced by Mayor Boris Johnson demonstrates this. The £1bn deal will see Advanced Business Park (ABP), based in China, turn a 35-acre site into the European headquarters for hundreds of Chinese firms.
Efforts such as these are paying off and the UK is the number one destination for Chinese investment on the continent, according to the government. Last year alone it attracted nearly £2bn of FDI, while more than 600 Chinese businesses set up in the UK.
The fifth UK-China Economic Financial Dialogue
Economics, trade, investment and financial markets were the four key pillars of October’s Dialogue between the UK and China. The results lay down a clear path for increasing Chinese FDI in Britain as it grows.
Economics
Both China and the UK committed to avoiding protectionist measures and ensuring both economies remain open. There was also a joint agreement to cooperate on addressing cross-border tax avoidance and evasion, which has been a major priority for the David Cameron’s UK coalition government since coming to power in 2010.
Trade
Exports to China from the UK have doubled over the past four years and the Shanghai Free Trade Zone will keep trade between the two nations on an upwards trajectory over the coming years.
"That is all about developing services," Mr Osborne said. "And as an area of such strength for the UK, we specifically agreed to add the development of this project to our 'unparalleled' list of collaboration projects and to have further discussion on British involvement in this exciting Chinese initiative."
Investment
The fourth dialogue, held in 2011, established Chinese investment in British infrastructure as an integral part of the relationship, bringing about collaboration on the redevelopment of Manchester Airport City. This was reiterated during the most recent meeting, underpinning the memorandum of understanding on Civil Nuclear Cooperation.
Later, Mr Osborne announced that the UK government will encourage Chinese companies to take a stake - including potential future majority stakes - in the development of the next generation of British nuclear power.
Two of China’s internet giants - Huawei and Rekoo - also made investment commitments, confirming the UK’s status as a world centre for digital innovation.
Huawei will create a new US$200m R&D centre in the UK as part of their US$2bn investment commitment. Meanwhile, Rekoo will be the first high-profile Chinese tech company set up in London’s Tech City.
Finance
More than 60% of RMB payments made outside of mainland China and Hong Kong are made in London. However, the UK wants to go further in making the country a RMB hub.
Investors in London will be able to apply for licenses to invest directly into China under the RMB Qualified Foreign Institutional Investor Pilot. The People's Bank of China has already agreed the capital's initial quota will be RMB 80bn - a move Osborne has labelled as "very significant".
The Bank of England has also agreed that Chinese banks will be able to apply to establish wholesale branches in the UK, enabling them to significantly scale up their activity.
"We have today agreed to work to ensure that the London market has continued access to ample RMB liquidity, through appropriate additional settlement and clearing arrangements in London, and once operational, the new China International Payments system," Mr Osborne said. "A great nation like China should have a great global currency."
Making FDI possible
Coinciding with the UK-China Economic Financial Dialogue, the UK government announced it would simplify and streamline the visa application process for visitors from China.
This will take place through three key steps. The first will be a new pilot scheme which will allow selected Chinese travel agents to apply for UK visas by submitting the EU’s Schengen visa form. This will put an end to the current system of two separate applications, which leads to duplication.
A new 24 hour ‘super priority’ visa service will also be made available from summer 2014, while a successful VIP mobile service operating in Beijing and Shanghai is likely to be expanded to the whole country. This will allow visa teams to go to applicants to collect their completed forms and biometric data, cutting down the time this takes to just five minutes.
TMF Group can also help Chinese firms when expanding to the UK. We have a dedicated team of specialists in place which can take care of the administrative hassle of moving across borders and deal with often complex local governance and regulations in Britain.
Find out more and get in touch.