China to Invest in London Docklands and Manchester – the Dalai Lama Dividend?

As a Chinese real estate developer announces that he could lead a major development in the old Royal Albert Docks to build an Asian financial and commercial Centre alongside Canary Wharf, and, more significantly, a Chinese major Bank announces an investment role in a development alongside Manchester Airport, some are asking if this is a dividend for the UK as a reward for forsaking the Dalai Lama and re-asserting Chinese sovereignty over Tibet.

My frank answer to that is no. China might have delayed announcing these moves until the diplomatic and political relations were normalised, wanting to invest with nations it could trust to respect it, but the investments are not a mere pay off for political goodwill. The political relationship is being restored but it has a long way to go as there is still some core issues to work through. The UK will not have a political relationship with China of the German type until much changes.

The pronouncements by the Prime Minister and the Foreign Secretary in the House were significant to the Chinese, but were not new positions of the UK Government. They were a formula to enable relations to be restored, and it will take more than this alone to create a close and meaningful political relations. But it is real progress and we must hope that time and conversations will lead to better understanding of each other’s priorities and interests.

But, China is investing its funds away from mere US Treasury bills into investments that help to deliver its goals. The political thaw has allowed that to speed up as it affects Chinese investment in the UK.

The first category of Chinese investment is into resources, much of it Africa, Asia and South America, then into brands and technology and market share, which tends to be more in the West, and then into infrastructure and real estate as stable sources of return and political relations with key nations. China is also developing a logistics global network which can be found in airports in Italy and Germany, ports in Greece and Sri Lanka,

Manchester will be a part of the real estate and, perhaps, ultimately the logistics aspects.

After 10 years China feels more confident in this 10-year plan to back its Going Global with real major investments overseas. In resources it is in investment and management of real mines and oil fields and pipelines. In other areas it tends to accept its limited experience and take more of an investment role.

China Global impact, originating in the 48 Group and with 60 years experience of China has long been at the forefront of China’s trade and investment activity and is experienced in assessing its moves, having a mite more insight and participation.

So we view this from a historical perspective and with some experience of how these waves of Chinese activity tend to play out.

The British market is an important one for Chinese exports and we can expect major moves over the next 10 years to acquire investments all the way through brands to retail chains, and into the infrastructure through rail and nuclear and other areas, and into logistics to secure their transport links.

Some may see China as having different categories for different countries but the real challenge is to understand China’s Going Global, as you can then see how the individual moves combine into a total picture.

China will expect that the UK will stay a part of the European free trade area whilst being realistic about the UK’s ambivalence over a deeper union in currency and political institutions – an attitude that would reflect China’s own approach to an Asian Union, perhaps. The Chinese view about such regional Unions are not so dissimilar to many in the UK, favouring free trade and economic reform. There is much to discuss here as well as understanding how China will prevent welfare crippling the national budget.

While our political leaders feel their way through the tensions of different value systems, which are exacerbated by media reluctance, the global need for growth and inward investment will drive British policies, or at least we hope they will.

Visits by Boris Johnson, George Osborne and, it seems increasingly likely, the Prime Minister will help ease the top level tensions, but warm relations are a fair way away yet, but can slowly rebuild, just like a marriage that has suffered a serious challenge – it takes time to rebuild trust.

But Manchester and a City Docklands Asian Centre are testimony to China’s long research. Both of these projects have been known to me with China for at least 20 years, and we have known they have been interested to study more. From the times of Manchester twinning with Wuhan and Kath Robinson’s visits two decades ago this was being floated. Same with the Dockland project.

Manchester and Liverpool may get a North West dividend but not the one they expected. China has long used Felixstowe as its port of entry to the UK – the port owned by Li Ka-shing. Liverpool has failed to mount a serious competitive bid to lure the Chinese to the better-serviced area that it is part of with motorways, a good work force and the airports at Liverpool and Manchester.

But the Chinese ship currently moving through the other North West – the North West of Canada and the Arctic crossing and experimenting with summer sailings through to Europe could herald a renaissance for Liverpool and Manchester, a veritable golden opportunity for Peel Holdings and other companies with major real estate around the docks. A major opportunity for jobs for the North West. Music to the ears of Lord Heseltine, who has sought such reconstruction since the early 1980’s.

We may find Chinese interest in the Prudential and Tesco and other investments, and again you will now know the lead times are a long way back.

China moves slowly and carefully, and all projects move only when the overall clearances come down, after a protracted period of experimentation. But the fact that Chinese interest occurs does not mean that it is a done deal. Many projects are started and not completed, as is normal in the world of commerce. Bringing home a Chinese deal is much, much harder than getting the initial announcement.

China is rolling in and starting to play a key role in British financial and business circles, and we still need to define how and what we want. China’s form of guanxi and working is different from ours and we may yet need to help China use more modern and transparent forms of building networks.

The news is good so long as we manage ourselves and China in a historic and reflective way.

Our car industry could not be run by the British, but is a global production star run by overseas interests. At the end of the day we have to learn something about ourselves, including about how to profit from foreign management and keep the right amount of the value here.

The fear that a foreign invested economy would lead to shut downs at will during crises has been proved misplaced. We just need modern infrastructure and business practices and we can compete globally.

Our next big moves with China could be much bigger both in the UK and outside the UK in developing nations.

If Tesco or the Prudential manage their global expansions with Chinese shareholders at a significant level, we shall have the makings of a new special relationship in business. We need to be sure that those who fear the Chinese conspiracy see instead the Chinese stimulant to global growth. It is only by focusing on ensuring the latter that one avoids the former.

It does need structure though.

Let’s hope the next phase of visits starts building the real structures to replace the dialogues that are beginning to outdate themselves. Things have moved on and so do we need to move on.

We need new bilateral structures and new national structures and new regional and global structures. The agendas need to grow and broaden to include how to manage nations and global challenges effectively so that sustainable and peaceful development spreads across the world.

 



Categories: Exports, Investment, UK

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