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Well before the UK voted for Brexit, China had made its view on the issue abundantly clear. It was dead against it.
Everyone from President Xi Jinping to Wang Jianlin, one of China’s richest businessmen, had expressed fervent hopes that the top European destination for Chinese investment would remain within the EU.
Mr Wang, chairman of Wanda Group, a conglomerate, even warned of an investment exodus. If the UK voted for Brexit, he said in February, “many Chinese companies would consider moving their European headquarters to other countries”.
So the vote in June came as a nasty shock to Chinese interests. However, the impact of the UK’s fateful decision has been uneven; some aspects of the bilateral commercial relationship appear unaffected, while in other areas real concerns linger.
One big worry for Beijing is that the government of Theresa May, who took over from David Cameron as prime minister in the aftermath of the vote, might be less friendly toward Chinese investment than its predecessor, according to Chinese officials, who declined to be identified.
Beijing had seen Mr Cameron and George Osborne, his chancellor, as the “dream team” that turned the UK into the most open of any western country for Chinese investment. A “golden era” in bilateral ties was proclaimed as Mr Xi visited London in October 2015 and nearly £40bn in investment deals and contracts were signed.
But members of Mrs May’s team, including Nick Timothy, her joint chief of staff, are perceived by Beijing as holding a more guarded view toward aspects of China’s corporate embrace.
Such concerns grew after Mrs May delayed approval of the £18bn Hinkley Point nuclear power station to reconsider aspects of the deal, including Chinese involvement and questions of national security.
In early September, Mrs May approved the Hinkley project, eliciting statements of delight from CGN, the Chinese state nuclear company.
However, London also hinted at stricter controls on foreign investment in a statement which read: “There will be reforms to the government’s approach to the ownership and control of critical infrastructure to ensure that the full implications of foreign ownership are scrutinised for the purposes of national security.”
Notwithstanding questions of national security, the flow of acquisitions by Chinese companies of UK assets has remained strong in the aftermath of the Brexit vote, suggesting that some of post-Brexit scenarios may have been overblown.
Examples of deals announced in the weeks after the Brexit vote have included Leyou Technologies’ $150m acquisition of Splash Damage, a video game developer, the £921m acquisition of Odeon & UCI Cinemas group by Wanda Group subsidiary AMC Entertainment and Sichuan Guodong Construction’s £1bn investment over the next 60 years in the northern city of Sheffield to develop hotels, student accommodation, retail and leisure space.
Kevin McCabe, chairman of Scarborough Group, whose company has joint ventures with Hualing of China for developments in Manchester, Leeds and Sheffield said that his partners had questions after the Brexit vote but it had not put them off the UK and they remained committed to the projects.
“To a man they are all saying now is the time to go into the UK — not just because the pound is cheaper to them,” said Mr McCabe, who noted the excitement Chinese feel about the “northern powerhouse” region of the UK.
In addition, Chinese companies’ appetite for UK football clubs — whetted by Mr Xi’s selfie with Mr Cameron and Manchester City star Sergio Aguero last year — continues unabated. The US owners of Liverpool FC have appointed financial advisers after an unsolicited approach by a consortium led by Chinese investment group Everbright and PCP Capital Partners, people close to the talks have told the FT.
In August, West Bromwich Albion was bought by a company controlled by Chinese entrepreneur Guochuan Lai in a deal thought to be worth about £150m. That deal followed takeovers at Aston Villa and Wolverhampton Wanderers by Chinese suitors.
However, the business rationale behind football clubs and urban regeneration in northern England has relatively little to do with the EU. The same cannot be said for the future of London as a financial centre for business conducted in renminbi, the Chinese currency.
Mark Boleat, policy chairman at the City of London Corporation — the municipal authority responsible for London’s financial centre — says that Chinese financial institutions had several concerns over what Brexit would mean for their business. A key issue was “financial passporting”, the system which allows EU-based banks to conduct business across the region without need of regulatory approval.
“The starting point for a Chinese bank thinking of setting up business in Europe is that London is the place to be because everyone is there and if they are authorised in London they’ll be able to operate throughout the European Union,” Mr Boleat says.
“But passporting is clearly a problem,” he adds, explaining that Chinese institutions will be seeking clarity on whether they can conduct Europe-wide business from London. “There is no precedent for passporting from outside the EU. The passporting regime is something that is meant for within the EU.”
Additional reporting by Andrew Bounds