(Yicai Global) July 10 -- Should Chinese enterprises stay away from the British market or continue to build on their presence in the country, given uncertainties associated with Brexit talks? What should Britain do to create new growth drivers taking advantage of opportunities offered by the ‘One Belt, One Road’ initiative? These are the questions Britain’s ‘Brexit’ talks that is expected to lead to the UK exit from the European Union have imposed on many business enterprises as well as political decision-makers.
“The outcome of the Brexit negotiations is a crucial factor, and companies, in fact, face considerable uncertainty if they want to invest in the UK now,” Li Mingjun, president at China Europe International Business School (CEIBS), told Yicai Global in an interview during the Third European Forum co-organized by the CEIBS, British Chamber of Commerce in China and Yicai Global on July 6. “However, business investment inherently involves risks, and nothing can radically change the UK’s advantages in the financial market,” he added.
London functions both as a trade participant and service provider in developing the Belt and Road Initiative, and, “We are happy to take part in the ‘One Belt, One Road’ program, not only because it is the most ambitious infrastructure project in the world, but also because we can benefit from it,” said Catherine McGuinness, chairman of the Policy and Resources Committee at City of London Corporation, at the forum.
‘One Belt, One Road’ Ushers in New Globalization Era
Slow economic recovery across the world today dictates that regional collaboration has become an important driver of economic development as well as going forward. The Belt and Road initiative, championed by China and other en-route countries, has injected new vigor and vitality into the globalization campaign.
The initiative has proven very popular among all nations involved since its launch four years ago, and has achieved global consensus, pointed out Liu Xiaoming, China’s ambassador to London, at the event. “‘One Belt, One Road’ concretely practices the ideal of building a community of common destiny, supports the transition toward an open global economy, encourages various forms of innovations, and demonstrates China’s commitment to achieving economic growth through win-win cooperation as a world power,” he stressed.
Implications of the international initiative are four-fold, suggested Yang Jiemian, director of the Academic Committee of Shanghai Institute of International Studies. The first, it will create new economic growth drivers in en-route countries amid weak global economic recovery. Second, successful implementation of the initiative depends on policy and financial incentives and the public support. Third, as more nations and organizations embraced the initiative, its coverage has continued to expand, leading to the development of many new cooperation mechanisms. Lastly, through comprehensive and integrated collaborations, the countries can acquire a broader strategic vision that allows them to deliver bigger results.
It is worth noting that a growing number of European nations are now interested in market opportunities and cooperation brought by the Belt and Road Initiative. British companies, in particular, now place great emphasis on the Initiative as an important part of building bilateral partnerships with Chinese enterprises. It will also enable them to break into new markets after the UK’s withdrawal from the European Union.
“We’re now in a golden age for developing China-Britain relations,” Li opined, “With the launch of ‘One Belt, One Road’, Britain as the world’s fifth largest economy has become a popular investment destination for Chinese enterprises.”
Uncertainties Surrounding Chinese Investments in the UK
Chinese companies have invested in virtually majority of the UK’s most competitive businesses ranging from real estate to new energy, finance, top-tier brands, sports and household services.
The two countries have deepened cooperation in infrastructure construction, energy and transport and industrial manufacturing in recent years, and started to jointly develop third-party markets as new growth drivers for both economies.
However, the British vote to leave the European Union last year has thrown the country into tough negotiations with the EU in the next two years. The situation is further compounded by prime minister Teresa May’s surprise call for an early general election, the outcome of which has caused even greater political uncertainty in the country. So, will the mounting uncertainties affect Chinese businesses investing or expanding their businesses in the UK?
“Uncertainties arising from Brexit negotiations will make the situation more complicated for our business expansion operations,” Liu Yu, Alipay Europe, Middle East and Africa director, told Yicai Global in an interview. “But we’ll still respond to the challenges and uncertainties with an optimistic attitude. I believe, after a buffer period, [we] are prepared to develop businesses in Britain. If the outcome of the negotiations is different from what we expect, there will be alternative plans, and this is what we need to do now.”
Many guests at the forum believe that the British market, despite the current political uncertainty, may be a suitable place for Chinese enterprises looking for overseas merger and acquisition opportunities, and Brexit will push the UK to strengthen its cooperation with other countries. Chinese enterprises are best-known for their financial, manufacturing and internet commerce strengths. British companies, on the other hand, boast technology and talent advantages. So, they can partner up to develop third-party markets through complementary collaborations. Furthermore, finance as an important partnership building tool can facilitate business cooperation between the two countries.
As far as Belt and Road projects are concerned, Chinese companies seeking funding abroad need to collaborate with well-established financial institutions, Li said, and this is when they can partner up with British financial firms. “The UK has traditional advantages in high-end financial consulting services such as due diligence and project analysis, and these won’t be affected by Brexit or political instability,” he pointed out.