The UK and China celebrated 40 years of full diplomatic relations last year, and it is fitting that this political milestone was underpinned by booming bilateral trade and mutual investment ties.

The growing demand for goods and services between our two countries — in the face of economic uncertainty — is a vote of confidence in our partnership and an engine for economic growth.  Bilateral trade between the two nations reached 46.6 billion pounds (US$74.6 billion) in 2012, with UK exports of goods and services to China totaling 13.7 billion pounds, up 10 percent from the previous year. China exports to the UK accounted for 32.9 billion pounds.

London has not only held its position as the top city for international business but also maintained its share of the global financial services, which remains at its pre-crisis value of 31 percent. London is resilient because it adapts, it innovates, it invests, it stays modern and it treats the changing shape of the world economy as an opportunity.

The European Union is China’s largest trading partner and China’s largest export market. As Europe’s financial capital, London is the gateway to the rest of the continent for the significant number of Chinese companies that are growing operations there to enhance their brands and international exposure.

In 2010, British Chambers of Commerce statistics showed that 400 to 500 Chinese enterprises, encouraged by China’s “go out strategy,” established a presence in Britain, including China’s biggest five banks.  Many of them use the City of London as their European hub. Moreover, as of June 2013, seven Chinese companies — four from the mainland and three from Hong Kong — were listed on the main board of the London Stock Exchange, with a market capitalization of 12.344 billion pounds. A further 46 were trading on London’s AIM market, with capitalization of 2.499 billion pounds.

The partnership between the UK and China can help drive financial and economic development. The new Chinese leadership has vowed to deliver steady growth with comprehensive financial reforms. Recent developments, such as the People’s Bank of China’s announcement on interest-rate liberalization and the plan to establish a free trade zone in Shanghai, are both positive steps that recognize international financial service expertise can accelerate the process.

Expertise and capital

The City of London is the leading global center for financial and professional services, with a unique concentration of international expertise and capital, supportive legal and regulatory structures, and advanced information technology infrastructure. Utilizing this unique cluster of knowledge and experience can help to develop China’s own financial sector, as Shanghai seeks to develop its global financial services capabilities.

Meanwhile, the UK continues to attract a wide range of investment from across the globe. Chinese investment is welcome for projects such as infrastructure and technology, with a wide range of opportunities, demonstrated by the recent 1.2 billion pound deal between the Greater London Authority and Advanced Business Park to transform Royal Albert Dock into London’s next business district, the Dalian Wanda Group’s 720 million pound development project in South West London, and Huawei’s planned London office dedicated to managing global finances as part of its 1.3 billion pound investment in the UK.

The investment flow between the UK and China has been a two-way street. By the end of 2012, direct investment from the UK to China was US$18.76 billion, ranking second in the EU after Germany. Chinese investment to the UK is also rising quickly, with more than US$8 billion. But if we look at the statistics from another angle, only 0.5 percent of inward investment in Britain is from China. In the past decade, UK overseas investment in the Gulf, Russia and India has grown much faster than in China. The potential for future growth is huge.

The City of London has been working with the British government to help increase the amount of Chinese investment into the UK and to support China’s National Development and Reform Commission in creating a practical investment guide to the UK. We were pleased to support the visit of a delegation from the commission to the UK this July. Its members were seeking to learn more about the successful investments from China in advanced manufacturing, financial and professional services, life sciences, information and communications technology, and energy — all sectors of UK excellence.

Yuan business

Given China’s growing economic importance, the internationalization of the yuan is inevitable. The City of London Corp has worked for years with Chinese authorities on this vital issue. It has been more than a year since the official launch of the City of London initiative for London as a center for yuan business. Our latest report shows London’s role in the global yuan market grew significantly in 2012, both in business volumes and in the number of products provided by London-based banks. 

We warmly welcome extension of the Renminbi Qualified Foreign Institutional Investor program to encompass London, which allows qualified investors to raise offshore yuan funds and invest directly in Chinese mainland equities market. It’s another signal showing that Chinese authorities recognize London as leading the way for global offshore yuan centers. The agreement of a currency-swap line between the Bank of England and the People’s Bank of China also highlights the significance of the yuan’s internationalization to London and gives greater confidence to market participants.

The only way a country can keep pace in the global race today is by embracing international collaboration. China and the UK have long shared a productive partnership, and there is potential to further cooperate in maritime services, legal services, infrastructure and high-end manufacturing. China and Britain will enjoy a brighter future together that will continue to benefit communities and businesses for generations to come.