London, China’s new offshore trading centre

The Big Ben, London

THEY already own Weetabix, Savile Row tailor Gieves & Hawkes and stakes in Heathrow Airport and Thames Water but that represents a mere trickle compared with the wave of money the Chinese are about to unleash on the UK.

In the past few months they have also taken a stake in our nuclear industry, bought one of Britain’s bestknown buildings and rescued the company that makes black taxis.

In a sign of what is to come state-owned China National Nuclear Corporation and China General Nuclear Power Corporation have become key backers of the planned £16billion Hinkley Point C nuclear power station in Somerset. Privately owned car manufacturer Geely Automotive has rescued Coventry cab maker Manganese Bronze and insurance giant Ping An has paid £260million for the futuristic Lloyd’s of London building.

Designed by Lord Rogers the Grade 1 listed landmark, famous for having its lift shafts on the outside, is exactly the kind of trophy asset the Chinese like to buy.

And of all the deals just mentioned it is the most significant because it highlights how the property sector has become the bridgehead through which money has started to pour in, not just from China but from other wealthy parts of Asia too in anticipation of a boom in banking and foreign exchange.

China – which is sitting on more than £2trillion of foreign exchange earned as manufacturer to the rest of the world – has chosen London to be its offshore centre for trading in its currency and the main foreign outpost for its investment banks.

Experts say the investment heading our way is on an unprecedented scale and will have a dramatic effect on the capital city and the rest of the country as the cash cascades through the economy. Not only will it attract billions of pounds of capital into the UK’s financial services industry it will create tens of thousands of jobs.

The Dalian Wanda conglomerate, which has bought luxury yacht maker Sunseeker for £320million, is putting £700million into two new skyscrapers, while property investor Gingko Tree has been buying up buildings.

It is not just the commercial property market that is starting to reap the benefits. Investors are also eyeing up residential sites to provide the homes for the expected influx of workers who will fill the newly created jobs. This month alone Hong Kong entrepreneur Henry Cheng Kar-Shun paid £186million for full control of a 147-acre site next to the O2 centre in Greenwich, having bought 60 per cent last year for £480million. And Singapore’s Oxley Holdings paid £200million for Royal Wharf on the Thames.

East London and Docklands are seen as particularly attractive because of development potential and their proximity to the financial centres of the City and Canary Wharf. The success of the 2012 Olympics acted as a showcase for regeneration in the area.

Meanwhile the handful of Chinese banks already here are looking for bigger premises while those seeking to move to these shores have begun the search for suitable offices and trading floors. Even the Chinese Embassy is looking to relocate as it prepares to double the number of its staff. “We think this is just the tip of the iceberg,” said Tony McCurley, a partner at leading property advisers GM Real Estate.

Although the investment is gathering pace it is the fruits of years of careful negotiation between the British Government and Beijing, culminating in a series of deals brokered by Prime Minister David Cameron, Chancellor George Osborne and Mayor of London Boris Johnson.

A relaxation of existing rules means that investors will be able to buy Chinese stocks and bonds through London rather than Hong Kong while Chinese investment banks will be allowed to set up branches in the UK.

But the most significant change of all will come around the end of 2014 and early 2015 when the Chinese currency – the renminbi or yuan as it is more commonly known – loosens its ties to the US dollar and London becomes its designated trading outpost. It has been a hard fought battle and one that New York, Frankfurt, Paris and Geneva were desperate to win.

Boris Johnson said: “The Chinese economy is without doubt an up-and-coming powerhouse in the 21st-century financial world. The fact that Chinese banks will soon be able to set up wholesale branches and trade in renminbi right here in London really does cement the capital’s reputation as the global centre for finance.”

Thanks to Greenwich Mean Time, which allows London to trade with Asia in the morning and the Americas in the afternoon and evening, the city has always been at the centre of international currency trading. But there are other attractions too, such as English, the global language of business, as well as the UK’s financial regulation system, which while no pushover, is not seen as restrictive as that of the US, and a legal framework that is recognised around the world.

Backing all this up is a wellestablished network of support services such as law and accounting, a respected education system and a stable political climate.

McCurley said: “London is perfectly placed for global trading. It was selected over other European cities like Paris and Frankfurt because of the skill base, the language, the legal system and the UK has always welcomed overseas investment.”

He added: “The Chinese banks have started the process but the insurance companies are following quickly behind. Investors are looking at a sharp rise in occupational demand.”