Chinese Investment Pours into UK
“It is critical to recognize that Brexit represents a real shock about which monetary policy can do little,” Mark Carney, governor of the Bank of England, told the International Monetary Fund earlier this month. “Monetary policy cannot prevent the weaker real incomes likely to accompany the move to new trading arrangements with the EU, but it can influence how this hit to incomes is distributed between job losses and price rises. And it can support UK households and businesses as they adjust to such profound change.”
Brexit represents de-globalization, Carney said, and will proceed rapidly.
While it is clear Brexit will have a real impact on the British economy, how it will is often questioned. The Chinese, however, have not been frightened by the changes. Instead, they are rushing to buy British property and businesses.
Let’s look at five recent Chinese purchases:
- NuGen Toshiba nuclear power station: China General Nuclear will bid for an equity stake in a power plant in northwest England. The plant’s current owner, NuGen Toshiba, is experiencing financial trouble. The bid will test the British government which is in the process of developing a tougher screening process for foreign investors to ensure the investors don’t undermine the national security of infrastructure. A South Korean company, Kepco, also has expressed and interest in bidding on the equity stake. As Britain’s coal powered plants are replaced, an increasing number of foreign investors have stakes in nuclear plants. Source: Financial Times
- London Electric Vehicle Co.: Chinese automaker Geely, which owns the London Electric Vehicle Co., is establishing a manufacturing plant in Bedwas, Wales, a former mining town. The plant will manufacture aluminum panels for taxi chassis. The panels will be bonded at Geely’s Coventry, England, plant. All London cabs must be battery powered by Jan. 1, according to British law. Geely purchased London Electric Vehicle in 2013 for $14.8 million. Source: China Daily
- Commercial property: While many are hesitant to purchase London property in the uncertain economy and others are turned away by the high prices, Chinese investors have found the capital a great place to purchase commercial property. The investors find the decline in the value of the pound sterling to be beneficial to investment. Recently, Lee Kum Kee, a Hong Kong-based food company, purchased a London skyscraper for $1.75 billion. There also has been an increase in investment in Birmingham, Liverpool and Manchester. Source: Asia Times
- Public schools: Chinese billionaires want to send their children to prestigious British schools such as Eton and Harrow. So much so, they’re willing to pay for it. BE Education recently secured $70 million from Asian investors. “UK schools have got much bigger brands than the U.S. They’ve got a reputation, rightly or wrongly, probably due to Jane Austen and Harry Potter, for being these wonderful castle-like places that produce ladies and gentleman,” BE Education, founder William Vanbergen said. The company brings 2,000 Chinese students to the UK annually. Source: Evening Standard
- Seeking a trade deal: Since 2015, the Chinese have invested $14 billion in the UK. If Britain abandons the free movement of European Union citizens and goods, it could make British goods more expensive. Financial analysts disagree over whether this will make the UK more or less attractive to Chinese investment. They do, however, agree that a UK-China trade deal will happen, the only question is when it will happen. The UK cannot enter into bilateral trade agreements until after May 29, 2019, when the nation has official completed Brexit. Source: Business Insider
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