Dr Johnny Hon – Chairman, the Global Group.
I set up venture capital, angel investment and strategic consultancy, the Global Group, over 20 years ago, with the aim to facilitate business and commercial opportunities between East and West. To this day, I continue to stand by this guiding principle in pursuit of my passion for facilitating international trade and positive Sino-UK relations. Over the last two decades, we have seen the world become increasingly globalised, with more and more opportunities for cross-border transactions being created than ever before, not least with the rise of e-commerce. I strongly believe that this growing trend of globalised business and commerce will only continue, despite present challenges of unilateralism and protectionism in some quarters. This is particularly true of trade between the East and West and not least between China and the UK.
Made in China: The Chinese market
China became the world’s leading trading nation in 2012 and, as the country has progressively opened its doors, its export strength has grown tremendously. China’s exports beat forecasts in June, with a $41.6bn trade surplus generated, the highest level since last December. This fast growth makes China a prime ground for developed economies such as the UK to seek to develop strong and economically beneficial trade and investment relations. In August, China and the UK signed a landmark £240 million dairy deal, highlighting China’s increased appetite for dairy products and hence the diversification of the UK’s export potential to this crucial market. The Chinese market comprises 1.3 billion people, whose diversity is reflected in, for example, the great differences among China’s major cities. If you are looking to the East for your next investment, it may well pay to look beyond Beijing, Shanghai and Hong Kong. You will find that some of the lesser-known, yet still populous, cities offer a great variety of opportunity: for example, Shenzhen should definitely not be overlooked by those investors interested in AI and robotics; Hangzhou is a hot spot for cultivating tech start-ups; and Guiyang is continuing to build massively on its burgeoning reputation as the nation’s hub for big data.
Go West: The British market
The UK, and the City in particular, has long been a popular financial hub for foreign investors. At a time of great technological innovation, the nation’s renowned entrepreneurial spirit and start-up culture are helping it to become an even more attractive proposition. This is also reflected in the substantial interest from Chinese investors in UK property. London remains popular, of course, with a 65% year-on-year rise in enquiries, but perhaps more strikingly, northern cities are also proving to be attractive destinations for Chinese investment, with Manchester and Liverpool seeing increases of 200% and 162.5% respectively.
Similarly to China, trade and investment opportunities in the UK have diversified for Chinese suitors and have also grown in both quantity and value. According to a report by China Daily and Grant Thornton, an accounting and consulting firm, private sector investment from China grew last year by 71%, across a variety of sectors ranging from technology, media and telecommunications to travel and hospitality and manufacturing. State owned enterprises – primarily focused on financial services and the energy and utilities sectors – performed even better, achieving an investment growth rate of 174%.
A well-suited match
There are already many strong and long-standing commercial links between China and the UK and they have only been strengthened over the years. Such links are likely to strengthen still further as the UK considers its place in the world post-Brexit. We are already starting to see potential opportunities attract those entrepreneurs who have a far-sighted eye for solidifying future partnerships.
China’s Belt and Road Initiative (BRI) – considered by many as the greatest investment opportunity in decades – can help create a huge trading infrastructure capable of moving vast amounts of goods between East and West more speedily and efficiently than ever before. It promises to boost trade and stimulate economic growth by significantly improving China’s connectivity with some of its key trading partners.
The Arctic route is another facet of BRI which is being increasingly explored. Known for its rich natural and mineral resources, the Arctic also offers the possibility of a strategic link between northeast Asia and northern Europe. The proposed Polar Silk Road would increase trading options between the two continents and would improve journey times considerably – 12 days shorter than the traditional route via the Indian Ocean and Suez Canal. It is estimated this could save 300 tonnes in fuel on each journey, making exports more competitive in both directions.
The UK and China’s rich heritage of shared trade can surely only be further enhanced by such developments, giving plenty of grounds for optimism.In February of this year, Prime Minister Theresa May, on her visit to China, reaffirmed the British commitment to a ‘golden era’ in the Sino-UK relationship and sealed it with a handshake with President Xi Jinping. Now is the time to look to the future.