LONDON — Chinese schoolchildren of a certain age will be familiar with Luo Bao Bei. She’s a cartoon character, a “spirited, fun-loving seven-year-old” who “explores everyday life with her friends, family and animal companions, having adventures.”
But what millions of the cartoon’s school-age fans probably won’t realize when a new series airs this month, is that Lou Bao Bei was made in Britain.
The latest series of the cartoon has been animated thousands of miles away in the Welsh capital, Cardiff, after the city’s Cloth Cat studio was commissioned last year by the show’s creators, China’s Magic Mall production company.
The unlikely contract — worth £3.2 million — is just one small example of China’s burgeoning investment portfolio in the U.K. Heavily promoted by Liam Fox’s Department for International Trade (DIT), it is also a sign of the importance the British government has placed on the country as it seeks to strike trade deals and attract investment after Brexit.
With Britain leaving the world’s second-largest economy — the European Union — and its future trading relationship with the bloc still uncertain, ministers like Fox are looking to closer ties with the world’s other economic powerhouses. After the U.S. — turning inward under Trump — the plumpest target is China.
It has been two years since President Xi Jinping came to London in October 2015 on a state visit that marked what former U.K. Chancellor George Osborne was fond of calling a “golden age” in U.K.-China relations.
“As China steps up by 2030 to be the largest economy in the world, it follows that the proportion of U.K. trade with China will increase accordingly” — Oliver Treneman, development director at the DP World Gateway
Rather a lot has happened since.
But while business investment in the U.K. has taken a hit since the vote to leave the EU in June 2016 (which cost Osborne his job), Chinese inward investment and trade has remained bullish. According to DIT, bilateral trade in goods and services hit £59.1 billion last year, up 8.9 percent on 2015. In the same year, China invested $11.15 billion (£8.4 billion) into the U.K., according to the Henry Jackson Society, more than double the amount in 2015.
The list of major investments by Chinese companies signed or advanced since the Brexit vote goes far beyond a cartoon seven-year-old.
They include the Hinkley Point nuclear power plant, a £19.6 billion project in which China’s state-owned CGN has a one-third stake; Chinese developer ABP’s Royal Albert Dock re-development in east London; and the ‘Cheesegrater’, the tallest building in London’s “Square Mile” financial district, which was sold to Hong Kong-based CC Land for £1.15 billion earlier this year.
Chinese companies hold majority shares in, or own two Premier League football clubs — Southampton FC and West Bromwich Albion — and three Championship clubs: Aston Villa, Birmingham City and Wolverhampton Wanderers.
Fox’s department wants to deepen ties further still. Officials said they are eyeing President Xi’s “Belt and Road Initiative,” the grand — but vague — “New Silk Road” development strategy aimed at boosting economic ties (and Chinese influence) across the Eurasian landmass.
Participants from China perform in the Lord Mayor’s Show on November 11, 2017 in London, England | Simon Dawson/Getty Images
“The Chinese government has made clear that it wants to partner with the UK on its Belt and Road Initiative, with big opportunities for U.K. firms to help successfully deliver projects across Asia,” a DIT spokesman said. Officials cite the U.K.’s expertise in financial and legal services and advanced technologies as areas where British firms could be of service as China looks west.
Slow train to China
In April this year economic ties reached a symbolic milestone when the first U.K. to China freight train left its terminal in Essex to begin a 7,500-mile, two and half week journey to Zhejiang province in eastern China.
For now, the project is just that: symbolic. The journey was just a pilot run (and technically, because of railway gauge changes, only the containers go all the way; the train doesn’t).
But says Oliver Treneman, development director at the DP World Gateway deep-sea port and train terminal which hosts the service, the effort was a statement of intent. He envisions the day when Chinese owners of British luxury cars will routinely have spare parts sped to them by train — quicker than shipping, cheaper than flying.
“As China steps up by 2030 to be the largest economy in the world, it follows that the proportion of U.K. trade with China will increase accordingly. It’s a growth market, and we need to capture it,” he said. “The barriers between Europe and Central Asia are breaking down, and the China train speaks to that.”
Treneman, who spent 20 years working in marketing and industrial development in China, says his counterparts in the East simply didn’t get Brexit. For a country looking to enhance its position on the global trading scene and to liberalize trade flows, the spectacle of a major power throwing up barriers with its nearest, largest neighbor was perplexing.
“People [in China] didn’t understand it,” he said. “They fully understand the issues around sovereignty, of course. But they … clearly wonder why the U.K. would take a step back from dealing with its largest trading partner.”
He believes the Brexit vote will, nevertheless, be “immaterial” to Chinese enthusiasm for deeper trade and investment links with the U.K.
“I certainly don’t buy the idea that the U.K. is now the naughty schoolboy that has been shut out of the classroom,” he said.
While few doubt that Chinese trade and investment is a growth area for the U.K., many urge caution.
Shortly after she became Prime Minister, Theresa May paused progress on the Hinkley Point project amid concerns about cost — and security.
Then-Chancellor of the Exchequer George Osborne and Chinese President Xi Jinping in Manchester in October 2015 | Richard Stonehouse/AFP via Getty Images
Attention turned to her former chief of staff Nick Timothy’s comments on the ConservativeHome blog, at the height of Osborne and Xi’s love-in in October 2015, noting that security experts “reportedly inside as well as outside government” were concerned about placing major British infrastructure into the hands of a state that, despite today’s cordial relations, could feasibly one day be hostile.
Timothy is now out of government, but a new review of the national security implications of foreign ownership of major infrastructure and technology was launched in October. It is not aimed solely at China, but it risks having a cooling effect on investment in the future.
Earlier this year, Beijing’s ambassador in London, Liu Xiaoming, wrote an article in the Evening Standard — now edited by Osborne — deploring what he called “a confusing mixture of paranoia about so-called threats of Chinese investment to [the] U.K.’s national security, of exaggerations about China’s appetite to buy out Britain, and of talks about protection against investment from China.”
Security concerns aside, many doubt China — thousands of miles away with an economy that is fundamentally different from Europe’s — is a likely candidate to replace much of the trade the U.K. might lose with the EU after Brexit.
“It’s a good thing to look at doing a trade agreement with China in the long term. [But the U.K.] needs to build up some negotiating experience first” — Allie Renison, trade think tanker
Kerry Brown, professor of Chinese politics at Kings College London, describes ministers’ enthusiasm for the Belt and Road Initiative as “very metaphorical.”
“[Chinese money in the U.K.] is still a tiny amount of investment — if it were to go up a hundred times, it still would not replace the EU or the U.S.,” he said. “The second issue is the lack of experience of Chinese investors. The Chinese don’t have a track record of investing abroad. They’re getting bits and pieces but they don’t really understand the U.K. They don’t have a huge fund of knowledge and human capital to add to it, and we don’t have the knowledge going the other way.”
Allie Renison, head of trade policy at the Institute of Directors think tank, said that a trade deal with China was a realisticambition — just not quite yet.
“It’s a good thing to look at doing a trade agreement with China in the long term,” she said. “[But the U.K.] needs to build up some negotiating experience first. We were all for it when the EU was doing it. We need to take our time and deal with countries who are probably more like-minded before we go for the heavy-hitters.”
This article is part of an occasional series: China looks West.