British charm offensive targets Chinese cash

Thames Water deal was the biggest Chinese investment of its type yet seen in Britain

Britain is making huge efforts to attract investment from China to kickstart an economy teetering on the brink of recession – and it is playing its trump card of being outside the eurozone.
Finance minister George Osborne visited China this month and Prime Minister David Cameron welcomed Premier Wen Jiabao for talks in London in June, both repeating the message that Britain is “fully opened to foreign investments”.
In China, Osborne said he was keen to make London a leading international hub for the exchange of the yuan.
The attempts to lure Chinese investment show Britain is seeking to distance itself from the United States and France where some hostile voices question the intentions of China’s CIC sovereign fund.
The fund, lavishly stocked with 410 billion dollars (311 billion euros), is looking to invest in infrastructure projects in Europe and North America.
Britain hopes it will help finance the £30 billion worth of infrastructure projects that Cameron’s government launched last year in a bid to stimulate the struggling economy.
The efforts to gain China’s trust bore fruit this week when it was announced that the sovereign fund had acquired an 8.6-percent stake in water company Thames Water, which supplies the needs of 14 million people in Britain.
Osborne hailed the investment, the value of which has not been divulged, as “a significant step by China” and “good news for both the British and Chinese economies.”
The Thames Water deal was the biggest Chinese investment of its type yet seen in Britain. Previous Chinese forays had been limited to buying shares in blue-chip companies such as supermarket chain Tesco.
Most observers believe more deals are not far down the line.
If, for example, the project to build a new airport in the Thames Estuary ever goes ahead, “expect plenty of Chinese money behind it”, the Daily Telegraph said.
While Britain trails behind countries like Germany in trade, it is gaining ground in direct investment.
And its position firmly outside the troubled eurozone gives it a distinct advantage compared to many of its fellow members of the European Union.
“In terms of a comparison with the euro area, the UK does not have the uncertainty over a possible euro break-up to contend with,” Philip Shaw of Investec Securities told AFP.
Colin Ellis, of British private equity advocate BVCA, said that while Britain was well-placed to capture more investment, Chinese money was not yet gushing in to an economy that could be heading for a new recession.
“The independence of the UK should be a plus in terms of monetary sovereignty, and compared with some other European countries other economic fundamentals look somewhat better as well.
“In order to make a material difference to the UK macroeconomy, however, net inward capital flows from China would have to jump quite substantially.”
Few experts doubt though that propping up the British economy is not China’s long-term aim – Chinese eyes are fixed firmly on the United States and Britain is a convenient springboard to achieve that aim.

AFP