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China – Potential UK Partnership With Chinese Infrastructure Bank Signals Strengthening Economic Ties, Says Expert

16 March, 2015

 


UK government plans to become a founding member of the Asian Infrastructure Investment Bank (AIIB) could create “massive” trade and investment opportunities for UK firms in the Far East, an expert has said.

Infrastructure expert Richard Laudy of Pinsent Masons said that the UK could potentially play a significant role in Asian infrastructure investment over the next decade. At the same time, UK infrastructure was a “highly attractive” market for Chinese investors, he said.

 

“The UK has taken a pivotal step forward with China by partnering up with the AIIB and the UK is expected to potentially play a bigger part in Asian infrastructure over the next decade, especially China’s USD 40bn Silk Road Fund, which will create massive opportunities for the UK on the new ‘Silk Road’ to the West,” he said. “Financial liberalisation in China is also expected to encourage greater global presence from the growing nation in the long run and therefore open up the Chinese market to the West.”

 

“The UK is a key destination for investment from China and the UK’s infrastructure sector is proving to be highly attractive. With a stable currency, government and strong rule of law, the UK presents an attractive investment option for many a foreign investor, particularly China. But investors from China seek ‘shovel-ready’ projects, and the time it takes our planning process to work through can be a huge disincentive,” he said.

 

Laudy was commenting as Wang Jianlin, chair of China’s largest property company Dailan Wanda and reportedly the richest man in China, told the BBC that he considered the UK the best place in the world to invest. Wang praised the UK’s “free market openness”, and said that he was planning to invest USD 1bn in the UK entertainment industry.

 

Despite falling economic growth, China is on track to become the world’s largest economy by 2030 with the country’s economic output forecast to increase from USD 10.4tn in 2013 to USD 25.4tn in 2025. The recent Global Infrastructure Investment Attractiveness Index, compiled by Pinsent Masons and the Centre for Economic and Business Research (CEBR), ranked the UK as the third most attractive potential destination for China’s growing investment appetite. However, the same research found that the UK could attract up to GBP 105bn of that potential Chinese investment by 2025.

 

“We gauge that the UK potentially has the edge, presenting a really exciting investment opportunity for foreign investments over Japan and the US,” Laudy said.

 

“Financial liberalisation in China is also expected to encourage greater global presence from the growing nation in the long run and, therefore, open up the Chinese market to the West. China has already started to liberalise its financial sector but it could take a long time before insurance and other funds diversify their portfolios and start making global investments. Therefore, at least in the short term, direct investment from official sources will be the main form of outward investment from China,” he said.

 

In his interview with the BBC, Wang Jianlin said he expected the Chinese market to open up more to both private sector Chinese investors and foreign investors over time. He said that he also expected the state to begin privatising land, with resulting benefits for property developers.

 

This week, UK chancellor of the exchequer George Osborne announced that the UK was the first major Western country to apply to become a founding member of the AIIB, a China-led project being set up to support access to finance for infrastructure projects across Asia. As a founding member, the UK will contribute to discussions on the AIIB’s governance and accountability arrangements. Once fully operational, the AIIB intends to offer loans, equity investments and guarantees to encourage investment across a range of sectors including transport, energy, urban development and telecoms.

 

Pinsent Masons

 

For further information, please contact:

 

Richard Laudy, Partner, Pinsent Masons

richard.laudy@pinsentmasons.com

 

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