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China is a major investor in the Hinkley Point Nuclear Power Plant in Somerset
The economic relationship between the United Kingdom and China has grown significantly in the past two decades.
In 1999, China was the 26th largest export market in the United Kingdom. It is now in sixth place.
Trade between the two countries hit a record last year, with large infrastructure and education projects playing important roles.
But as tensions between London and Beijing escalate, following the UK government’s makeover by using Huawei’s 5G telecommunications equipment on the country’s networks, the ties that have benefited both nations may now be under threat.
Commerce
Last year, China was the UK’s sixth largest export market, worth £ 30.7 billion, according to the Office for National Statistics (ONS).
This was a record, from £ 23.4 billion in 2018, and the fourth consecutive year-over-year increase.
In the other direction, China was the UK’s fourth largest source of imports, worth £ 49 billion, also a record.
Leslie Young, a professor of economics at the Cheung Kong Graduate Business School in Beijing, told the BBC that, in her opinion, trade between the two countries would not be a victim of rising tensions between London and Beijing.
“The growing hostility between the UK and China is unlikely to have a strong effect on the main components of its trade. The main effect is likely to be on UK higher education and the role of the UK as a center for Chinese companies. “
Infrastructure
China also plays an increasingly important role in the UK’s infrastructure, including its nuclear power capabilities.
China General Nuclear Power (CGN) is partly funding the construction of the £ 20 billion Hinkley Point nuclear power station in Somerset.
The Chinese state-owned group also has the option to buy 20% of another planned plant, at Sizewell in Suffolk, and a majority stake in an entity seeking several more nuclear power projects.
China’s state sovereign wealth fund, China Investment Corporation (CIC), has an 8.7% stake in Thames Water, along with a 10% stake in the company that owns London Heathrow Airport.
China also has a stake in UK North Sea oil production through the China National Offshore Petroleum Corporation (CNOOC).
Chinese students
The number of Chinese students at UK universities has more than tripled since 2006, according to the National Institute for Economics and Social Research (NIESR).
Chinese student enrollment rates total at least £ 1.7 billion a year at universities and independent schools.
Experts have warned that UK universities will have financial difficulties if China imposes a ban on their students coming to Britain.
“Since Chinese students represent the largest body of foreign students, the financial impact would be great,” said a spokesman for the Shanghai-based market intelligence firm Emerging Strategy.
“Universities will need to adjust their costs or find new ways to generate income.”
But the British Council has downplayed fears of a mass exodus of Chinese students.
“Long-term planning to study abroad is unlikely to be affected by short-term political relations. The UK has always been a top destination for Chinese students,” a spokesman told the BBC.
Acquisitions
China has been active in many high-profile acquisitions in the UK, which has generated billions of pounds in Britain.
In March, British Steel was taken over by China’s Jingye Group in a move that is expected to save more than 3,000 jobs.
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Jingye Group of China is taking over British Steel
The Chinese firm said it would invest more than £ 1 billion to help modernize the mill.
Other notable acquisitions include black taxi maker LTI, which was bought by Chinese automaker Geely, and Wolverhampton Wanderers football club, which was acquired by Chinese conglomerate Fosun International.
Technology
The technology firm Huawei investment in the UK is high-profile and long-standing, dating back to 2005.
While Huawei will no longer participate in the launch of new 5G equipment, it still participates in the existing telecommunications infrastructure.
While much of the conversation has focused on Huawei, it is not the only technology company with which the UK and China share ties.
China’s thirst for UK high-tech companies saw it take over chip maker Imagination Technologies in 2017.
The vast majority of the cash for the purchase came from the Beijing-backed China Reform investment fund.
UK companies in China
While most of the flow is money to the UK from Chinese companies and government-backed entities, there are some big UK companies doing business in China, a country of 1.4 billion people with rapidly growing disposable income.
Important British companies are distributed in sectors such as energy, automobile production, pharmaceuticals and financial services.
Last year, the Chinese ambassador to Germany threatened “consequences” for his automakers if Huawei was blocked from Germany’s 5G networks, raising concerns that Beijing may use those tactics against the interests of other countries.
“Chinese citizens must quickly follow boycotts based on national interests dictated by the party,” said a Shanghai-based spokesman for market intelligence firm Emerging Strategy.
But Steven Lynch, managing director of the British Chamber of Commerce in China, told the BBC that he was optimistic that such a situation could be avoided.
“We hope that British carmakers importing vehicles to China and manufacturing locally are not the target of the UK government’s decision,” he said.
The pro-business group warned that British IT and telecom companies may also be at risk.
But Lynch added that the two countries should be able to “maintain strong trade and investment in the coming months despite the challenging political environment.”
