Trends in Chinese foreign investment in the UK

... Credit :
Shadrach   in Business & Finance

Last updated: 17 January 2020, 06:39 GMT

Dr Kerstin Braun, Chair of Stenn Group, shares her opinion on current trends in Chinese foreign investment in the UK

Recent figures have shown a substantial increase in Chinese investment in the UK over the last year. Between January and August 2019, Chinese companies invested $8.3 billion in the UK, compared to $6.1 billion in 2018 as a whole.

These figures are down from a peak of $20.8 billion in 2017 but are an indication that the willingness of Chinese investors to invest in the UK remains strong, particularly given that China has pulled back from its foreign investment operation since 2017 overall.

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This can be due to the capital controls being put in place at home, as well as the general slowdown in the Chinese economy which has caused foreign investment to scale back. Interestingly, it does not appear that Brexit has been a huge deterrent to China's investment choices. The increased investment in 2019 is attributed, in part, to currency fluctuations triggered by the pending withdrawal from the European Union (EU) from the UK.

What about the weaker pound?

A weaker pound has made UK assets more appealing, reflected in the fact that Chinese investment picked up in the UK but declined in other parts of Europe, including Germany. China is involved in everything from banking to consumer goods and services. Manufacturing and financial services saw the biggest gains in 2018, while real estate dropped. A few notable acquisitions this year were the selling of World First and Loch Lomond Distillers money transfer businesses.

Chinese buyers are known for looking to acquire big, internationalizable brands. As regards seeing a rise in Chinese entrepreneurs looking to invest in the UK, currency weakness will certainly make UK assets more attractive. Chinese buyers are known to look for large, internationalizable brands to acquire. As for seeing an increase in Chinese businessmen looking to invest in the UK, currency depreciation is sure to make UK assets more attractive.

What is the market relationship between Britain and China?

The free, accessible and transparent capital markets of Britain will continue to appeal to Chinese investors as an investmentopportunity. Simultaneously, relative to the height of 2017, Chinese companies are now becoming more cautious about the forms of foreign investment they make. Is it a brand or concept that can be internationalised? There’s a more prudent approach. Potentially, some challenges can be expected, such as scrutiny over investment from China into sensitive sectors of the UK economy, such as energy and telecoms.

In addition, large parts of the economy are still closed to full foreign involvement in China, although language barriers and the significant difference in time can also pose a challenge.

Without regard to any unexpected circumstances, the overall developments suggest a healthy investment rate, even in the face of currency devaluations caused by the impending UK departure from the EU. In fact, given the above, the UK appears to be a more attractive market for some investors compared to some of the other European markets as exemplified by the increased investments recorded in 2019. Chinese investors consider the capital markets of Britain highly desirable for the expansion of their successful national brands.