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
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 (CIC), the country’s sovereign wealth fund, bought a 9% stake in Thames Water. And a few days ago, Wales & West Utilities, 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 state-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 1,000 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 £2 trillion 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 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.
Penny Stock Picks