Business / Economy

UK becomes top destination for outbound deals

By ZHANG CHUNYAN (China Daily) Updated: 2014-12-23 13:19

Property, financial services, advanced manufacturing major beneficiaries

The rapid increase in Chinese investment in the United Kingdom is set to continue in 2015.

According to the Chinese embassy, the first seven months of this year saw a surge of money from the mainland.

Chinese companies completed nine major mergers and acquisitions during that period, which were valued at more than $5 billion-a larger figure than in all of 2013.

One prominent investment involved Nanjing-based Sanpower Group Ltd, owner of the Nanjing Xinjiekou department store, which agreed in April to take control of retailer House of Fraser in a deal valuing the company at more than 450 million pounds ($745 million), including 250 million pounds of debt.

It was the biggest international retail acquisition by a Chinese company.

Cumulative investment by Chinese companies in the UK stands at almost $40 billion, including a 10 percent stake in Thames Water Utilities Ltd, Britain's biggest water utility, held by the China Investment Corp, the sovereign wealth fund.

The $40 billion from China is twice the size of total flows the other way, and it makes the UK the largest recipient of Chinese investment in the European Union.

Property, financial services, information technology, advanced manufacturing, infrastructure, the creative industry and retail are popular sectors for Chinese companies investing in the UK.

For example, a large real estate deal was carried out by China Life Insurance Co, the country's largest insurer, which together with Qatar Holding LLC bought a building in London's Canary Wharf for 795 million pounds in June.

In June, China Construction Bank Corp, which has been selected as the first Chinese bank to provide yuan-clearing services in the UK, bought a central London office building off-market for about 110 million pounds.

Investment into the UK is expected to rise again next year as Chinese capital seeks a safe haven for outbound investment.

China's outbound direct investment reached a record high of $108 billion in 2013. ODI reached $74.96 billion for the first nine months of this year, up 21.6 percent year-on-year, and the upward trend is set to continue.

As Chinese companies expand their global reach, they see the UK as a major base in Europe. Many Chinese companies established their European headquarters in the UK.

The UK has generally welcomed Chinese investment. Officials such as Prime Minister David Cameron and Chancellor of the Exchequer George Osborne have even sought to attract more Chinese investment.

The view on Chinese investment is becoming more positive among people in the UK, who have come to understand the motivation, behavior and impact of Chinese companies.

The rapid growth of Chinese companies in the UK, organically and through acquisitions, is significantly contributing to the UK's economic growth and creation of jobs.

More importantly, both China and the UK are promoting and extending cooperation. Examples of this include high-speed railways and nuclear power stations.

The London-based Center for Economics and Business Research and law firm Pinsent Masons said in research released in November that China is set to invest 105 billion pounds in UK infrastructure by 2025, with energy, property and transport the biggest recipients.

There are many reasons to believe that China's ODI will continue to heat up and the UK will remain a primary destination for that capital.

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