From the Magna Carta to the Industrial Revolution, Britain has never shied away from stepping out from the crowd and doing things its own way. Now, as the country grapples with its decline as a global power, it is being bold in its attempts to remain relevant – with China’s help.
In mid-October its finance chief George Osborne and Boris Johnson, the mayor of London, flew to China seeking investment and partnerships in trade and finance. Beijing has not received any emissaries from the island nation for almost 18 months, after UK Prime Minister David Cameron met with the Dalai Lama in early 2012. They come home with several lucrative deals in the bag.
The message being sent out is quite clear: The UK is open for business and it doesn’t really care where the money comes from as long as it comes. It needs to be. As mayor Johnson noted, Chinese cash “enables us to get on with building projects that simply wouldn’t happen.”
China is interested. The UK was the fourth most popular destination for Chinese outbound investment in 2012, rising from eighth place in 2011 and 21st in 2010. Chinese investment in the UK in 2012 surged 95% year-on-year to US$2.77 billion, official data show.
State-backed Chinese companies have been given the go-ahead to invest in a new nuclear project, starting with small stakes that could eventually be allowed to turn into bigger holdings. London is even willing to pump Chinese cash into its planned “super sewer” system.
China’s foreign-exchange regulator has been actively but discreetly investing in UK property and infrastructure, putting US$1.6 billion into at least four deals, including a water utility, student housing, and office buildings in London and Manchester. Private capital is also coming. The £800 million (US$1.2 billion) “airport city” project in Manchester has a Chinese partner.
So why is there so much interest from China? For one, Chinese officials view the UK as the “most open” and “most market-oriented” economy in Europe. Historically, it has welcomed foreign investment across all sectors and offers security – the state doesn’t nationalize assets at a whim and the courts are independent. Assets are also competitively priced in this downturn.
This is reflected in its attractiveness. Last year foreign direct investment in the UK surged 22% from the year before compared to an 18% drop globally, according to a UN report.
London is a global center for everything from media to finance. It straddles the mid-point of a time zone that it gave the world and has exploited its imperial past to dominate sectors including shipping, currency exchange and international business law. Foreigners pour their cash in.
But the city’s prominent role – as flaunted in the Olympics last year – masks from overseas guests deeper cracks clearly apparent in the many parts of the country, particularly the industrial heartlands in the middle and north. The global economic slump has been unkind to these places, entrenching the effects of the 1980s recession and the decline of the manufacturing sector.
Building new roads, railways and power plants, all of which are desperately needed for the UK to retain its place as a leading economy if not by size then innovation, is costly. Treasury coffers are empty. So politicians board planes to court investors.
Brits largely shrug at news of Chinese investment. They are long used to foreign capital in public assets. Fears of a takeover by a “Communist dictatorship” have thankfully been confined to the pages of populist tabloid newspapers. There has been no backlash in parliament. Foreign investment is scrutinized but not shooed away. Even Huawei can do business in the UK.
Britain is no longer a superpower. In order to secure economic prosperity for its citizens it must stay ahead of the pack in key and innovative fields. Achieving this requires investment in world-class infrastructure. If China is willing to pay, then the UK should accept.