Chinese Investors Seek Safe-Haven of British Infrastructure

China is seeking financial sanctuary in Britain's energy, property and transport infrastructure....

China is seeking financial sanctuary in Britain's energy, property and transport infrastructure, with plans to invest a massive £105bn by 2025.

The world's second largest economy, responsible for producing the most high-net worth individuals in recent years than in any other country, has seen an economic slowdown in 2014 forcing investment overseas.

Chinese companies are set to cut capital spending in the country by around 7% this year, the biggest annual reduction since the global financial crisis, deepening concerns of an economic chill.

Deepening concerns for China's economy

Slower spending by companies underscores the challenges that China faces this year in containing an economic slowdown that could be the worst in 24 years, aggravated by a slumping property market.

Persistent cutbacks indicate that China's economy, heavily reliant on investment, will need to speed up rebalancing to feed growth.

Investment in its own industry and infrastructure is expected to fall further amidst economic uncertainty and a government campaign to curtail industries that are either heavy polluters or are stuck with a glut of unsold goods.

British infrastructure considered a safe-haven asset

Rather than pour capital into the flailing economy, China is looking to safeguard reserves through investment in economies where growth is forecast, such as the United Kingdom.

Chinese investment has already accounted for £11.7bn in Britain between 2005 and 2013. Investment has included sovereign wealth fund China Investment Corporation's acquisition of a 10% stake in Thames Water, Britain's biggest water utility.

As China continues on its downward trajectory, more investment outflows are expected with the US and UK at the top of the list of beneficiaries.

East Asia and Middle East Investors actively seek investment opportunities in UK

Researchers at law firm Pinsent Masons consider proposed Chinese investment to become a "game changer" for the UK. Partner Richard Laudy said: "We expect this to be the beginning of a major trend as a trickle of Chinese investment turns into a wave over the coming decade".

In the first half of 2014, Britain received infrastructure investment inflows of £2bn from China. Prominent deals include Sanpower's £490m investment in House of Fraser and the £115m real estate investment by China Construction Bank in Old Broad Street in the City of London.

China's increased investment in UK infrastructure comes as pension funds in East Asia and sovereign wealth funds of the Middle East are actively seeking investment options in the country.

- Tuesday 28 October 2014

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