OVER the past few decades, the UK and China have forged strong diplomatic, cultural and economic links, demonstrating the mutual benefit of working together on key issues such as global markets reform.
This has solidified the UK’s view that China is one of our most important trade and investment partners – and it is one of the reasons why both the City and the UK government are so committed to advancing UK-China relations.
China is vital to the UK’s economic interests. It is now the UK’s second-largest source of imports, with a 7 percent rise year-on-year to 36 billion British pounds (US$56 billion) in 2014. In the other direction, UK exports to China have tripled since 2007, with services accounting for one-third of our exports and reaching 3.3 billion pounds.
I am delighted to see we are making steady progress towards the goal of US$100 billion in bilateral trade by the end of this year.
Moreover, the UK is by far the largest recipient of Chinese direct investment in the European Union.
In 2014, the cumulative total reached US$40 billion, with average annual growth of 85 percent in the past five years. The sovereign wealth fund China Investment Corporation and its acquisition of stakes in Thames Water and Heathrow airport are good examples of Chinese investment in British infrastructure.
However, there are many more opportunities to be explored – not just within the infrastructure sector but in other areas where the UK excels. Such as transport, property, healthcare and energy. The potential for Chinese investment in the UK is immense, with the latest research showing that China will become one of the world’s biggest cross-border investors with global offshore assets tripling from US$6.4 trillion now to nearly US$20 trillion by 2020.
If the UK is to compete on the global stage, then we need to welcome this investment with open arms. We certainly have the capacity to do this. The UK’s transparent legal system, strong regulatory framework and competitive tax regime have created an extremely business-friendly environment, which we will continue to cultivate.
London cooperates closely with China on a huge variety of issues, but offshore yuan has surely been one of the most important and exciting areas of our partnership in recent years. The City of London initiative for London to be a centre for yuan business was launched in April 2012. Over the past three years, it has supported government and other stakeholders to enable the wider use of the currency for trade and investment, making substantial progress towards its long-term aim of creating a sustainable global yuan market.
The signing of the bilateral swap line, creation of a yuan clearing bank in London, and the issuance of the first non-Chinese sovereign yuan bond were all important steps in strengthening that business. Equally, the bestowal of a London RQFII (Renminbi Qualified Foreign Institutional Investor) quota and the launch of the first ever UK-domiciled yuan-denominated ETF significantly demonstrated that the Chinese currency is becoming a major currency for investment as well as trade.
The development of yuan products and services, both onshore and offshore, is an important part of China’s wider process of market liberalization. The currency’s use is intricately linked to the overall growth in China’s trade and investment and economic reform towards the “new normal.” We have been delighted to see yuan product and service volumes in London grow steadily.
The UK was the first major Western country to embrace the China-initiated Asian Infrastructure investment Bank earlier this year, and it is enthusiastic about collaborating with Chinese partners in the “One Belt One Road” initiative.
With an unrivalled talent pool for financial and professional services, UK expertise can provide unique support for mutual benefit. The UK-China Economic and Financial Dialogue is taking place this month in Beijing to promote bilateral financial cooperation for greater business development.
During my visit this week, I am looking forward to engaging with Chinese authorities and business to discuss the international use of the yuan, capital markets development, insurance, maritime services and other areas of mutual interest. I will also be listening carefully to the Chinese government’s policy responses to recent stock market volatility and discussing plans for future development of the Chinese financial industry.
This year marks the start of a “golden era” in UK-China relations.
In October, Chinese President Xi Jinping will visit the UK, the first visit by China’s senior leader in a decade. I myself look forward to welcoming President Xi to London. I am sure that these engagements will help cement even stronger ties between our two nations. My visit is, therefore, just the latest step in reaffirming these close bilateral relations between our two counties as we move forward on the path of prosperity.