London: a business gateway and leading city for Chinese investment
London is fast becoming one of the world’s most sought-after locations for Chinese investors and many financial experts believe this is in part down to current uncertainties within the Chinese stock market.
Despite figures from Britain’s Office for National Statistics showing an overall slowdown in growth in the UK housing market, in the first half of 2015, up to 9.4 % of property sales within prime residential areas of London were completed by Chinese homebuyers1, according to figures released by real estate consultancy Knight Frank. London house prices are still continuing to increase by an average of 7.2% year-on-year, with reports coming in from upmarket estate agents in the city of rising interest from Asian buyers investing in the property market. Chinese billionaires are happy to pay between £5 million to £50 million for property in the capital.
A big draw for the Chinese high investment volume for property is believed to be through an increasing number of Chinese parents wanting to educate their children in the UK. It is not an unusual trend either with China now being the top non-European country sending students to be educated in Britain. The most popular homes to be purchased are new builds, but there is also growing interest for period property that have had newly refurbished interiors.
In anticipation of the continuing boom in Chinese investment, as well as the increase in the number of high-net-worth individuals being attracted to the city, 54,000 new homes priced at £1 million2 or more are either currently under construction, or are already planned. It is not just the new and existing residential homes that attract Chinese investments. Chinese companies are major players with developers such as Shanghai-based Greenland Group and Dalian Wanda3, who are also choosing to invest in the booming market through building their own landmark projects. The Greenland Group4 is developing a site on the London Docklands that is to house a 67-story residential tower and once built is set to claim the title of the tallest residential building in Western Europe.
With much closer links being established between Britain and China than ever before in history and with the increased business activities and high investment volumes coming from China, it looks like this trend is set to continue.
China invests £30bn in UK plc
The recent deals and investments coming into the UK from China, believed to total around the £30bn mark, helped to secure a state visit from Chinese President Xi Jinping in October 2015, the first official visit from China in ten years5.
It is believed that the cash injection into the British economy will help to create 3,900 jobs across the UK and will help to further establish strong British-Chinese relations6. With trade and investments growing between the UK and China, the move has been welcomed as a “win-win economic alliance” according to Kamel Mellahi, a professor of management at Warwick Business School7.
With the UK set to receive investments into further strengthening its infrastructure, it is looking more likely to become a centre for trading China’s currency. The benefit for China is that it can showcase its work in the UK to other potential trading partners across Europe and the rest of the world. China is really looking to invest in their long-term international success on the world market.
Foreign investment in London and the UK is nothing new, but China is a new player on the international investment front, and as such has no proven track record to speak of. However, their willingness to forge strong partnerships in Britain shows that Chinese companies are major players that want to open up investment in the UK to help reduce fears from other countries about future possible Chinese investments. Inspired by the Chinese President’s visit last October, Business Secretary Sajid Javid said: “Global partnerships are essential in building a Britain that is stronger, more prosperous and full of opportunity. Deals like those announced today will ensure our economy remains resilient and our businesses feel well-equipped to face the future8”.
With Britain being the gateway to further investment across Europe, it becomes the most wanted finance and technology gateway between the super power of China and Europe and will be the most important communication centre between the East, the West and the rest of the world.
The ease of doing business in London, the skilled workforce, the high ROI, strong government support, fairness, equality, skills, R&D, innovation and infrastructure are some of the reasons foreign companies choose to expand, move or invest in London. With KSBC’s recent engagement with Chinese clients, we are totally convinced that their presence will allow them to conveniently connect with clients from all over the world.