UK-China 7th Economic and Financial Dialogue: Opportunities in China for UK Investors

By Jake Liddle

On September 21, a dialogue took place between the UK’s Chancellor of the Exchequer George Osborne and China’s Vice-Premier Ma Kai, concluding in a positive agreement to continue strengthening bilateral relations. Ahead of President Xi Jinping’s planned state visit to the UK later this year – which will be the first state visit of a Chinese president in ten years – Osborne’s visit to China was an effort to encourage the two countries’ strong diplomatic ties, with the Chancellor saying he would like the UK to be “China’s best partner in the West”.

The UK and China have enjoyed a cooperative and friendly relationship which has seen significant increases in trade and business over the years. According to HM Treasury’s overview of the dialogue, in 2014, China was the UK’s sixth largest goods export market, up from 14^th position in 2003, and in 2013, the UK attracted close to US$12 billion of Chinese foreign direct investment.

London hosts two thirds of all RMB payments outside of China, which inevitably attracts a large amount of Chinese nationals to the country, and in 2014, the UK issued 413,000 visas to Chinese visitors, seeing a rise of 11 percent on the previous year. As of this year, there are around 20,000 British nationals living in China. Both countries wish to continue this positive cooperation, and Monday’s talks touched on a number of areas, mainly concerning the following as listed by the Treasury’s summary:

Macroeconomic Situation

China and the UK have agreed to continue consolidating their macroeconomic policy coordination, in fitting with their domestic and foreign economic and financial situations, promoting both countries’ balanced and sustainable growth.

RELATED: Pre-Investment and Entry Strategy Advisory from Dezan Shira & Associates

Trade and Investment

In a bid to strengthen bilateral investment, the two countries have agreed to hold the first meeting of the China-UK Bilateral Investment Taskforce. They held talks about regulations on automobile fuel efficiency, market access and the Chinese Free Trade Zones. China will also invest in the Hinkly Point C Nuclear Power Plant, which is the UK’s first government guaranteed nuclear power station to be built in 20 years. An agreement was also reached on the construction of an investment/financing cooperation platform to aid investment in the infrastructure and energy sectors.

London as a Major Global Center for RMB Business

London is a leading RMB trading center, and is China’s most important offshore market. With the RMB entering one of the top five payment currencies in January (City of London), it is vital that the UK government welcome the currency for business in the capital. The two countries have made a series of agreements and support initiatives to consolidate RMB trade in London. A decision was made to extend the RMB/Sterling swap line, which was established in 2013, and it was announced that London would be the first overseas city to issue RMB denominated bank notes via the People’s Bank of China. Furthermore, the China Development Bank will also open a representative office in the UK, and both countries support the China Foreign Exchange Trading System’s plans to establish a presence in London.

Culture and Tourism

In culture and tourism, the UK has announced funding to initiate more cultural exchanges to China. The British Museum, Tate Modern and the Globe Theatre are all involved in projects to ‘export’ exhibits and tours during 2015.

Strategic Cooperation

China and the UK have identified the G20 as a key element in international economic cooperation, and with China hosting the G20 presidency in 2016, both sides are supportive of their mutual cooperation, agreeing to found a working group regarding international green finance. In technology, the two countries look to further fortify cooperation in emerging industries including those of life sciences, satellite applications and new energy vehicles, with two newly agreed joint programs utilizing space technology to improve agri-tech. They have also looked to create cooperative partnerships between Chinese cities and the UK’s Northern Powerhouse.

China and the UK have made efforts to further strengthen collaborative efforts in the health sector, looking to advance global solutions and action on antimicrobial resistance, supporting the African Center for Disease Control, aiding post-Ebola health efforts in Africa.

Infrastructure

The UK is to be China’s first major western country to become a prospective founder member of the Asian Infrastructure Investment Bank, part of China’s initiative to build the ‘One Belt One Road’, which the UK has agreed to support, and both sides have also discussed a China-UK Infrastructure Alliance, an organization which will support aspects of both countries major infrastructure projects, further encouraging British and Chinese businesses to work on infrastructure construction.

RELATED: U.S. Reluctantly Accepts China’s AIIB

Opportunities for Investors, Future Prospects

It is evident that there are many areas in which China and the UK are looking to develop. From China’s vast pan-Eurasia infrastructure project to the UK’s Northern Powerhouse, future prospects for investors are numerous. Medical, financial, construction and energy industries are all set to be jointly developed.

Using China’s Free Trade & Double Tax Agreements
In this issue of China Briefing, we examine the role of Free Trade Agreements and the various regional blocs that China is either a member of or considering becoming so, as well as how these can be of significance to your China business. We also examine the role of Double Tax Treaties, provide a list of active agreements, and explain how to obtain the tax minimization benefits on offer.

Employing Foreign Nationals in China
In this issue of China Briefing, we have set out to produce a guide to employing foreign nationals in China, from the initial step of applying for work visas, to more advanced subjects such as determining IIT liability and optimizing employee income packages for tax efficiency. Lastly, recognizing that few foreigners immigrate to China on a permanent basis, we provide an overview of methods for remitting RMB abroad.

Importing and Exporting in China: a Guide for Trading Companies
In this issue of China Briefing, we discuss the latest import and export trends in China, and analyze the ways in which a foreign company in China can properly prepare for the import/export process. With import taxes and duties adding a significant cost burden, we explain how this system works in China, and highlight some of the tax incentives that the Chinese government has put in place to help stimulate trade.

• Previous Article State by State: China and Connecticut Trade
• Next Article Hedging Against RMB Volatility in China