The UK and China made a raft of new agreements this week to the tune of around £1.4bn-worth of commercial deals, as the UK turns on its charm offensive to boost trade between the two countries as it prepares to leave the European Union.
During a two-day summit, the 9th UK-China Economic and Financial Dialogue (EFD), the two countries made agreements on areas of trade, investment and financial services, as well as forged new partnerships on industrial strategy and infrastructure initiatives.
On the trade front, new deals include an agreement between Smiths Interconnect and Huafeng to establish a new joint venture working on products for high-speed rail and commercial aviation; the establishment of UK fintech firm World First’s office and wholly foreign-owned enterprise in Shanghai; and a partnership agreement between Tsinghua X-lab and Future Planet Capital to invest in innovative companies.
During the event, the inaugural meeting of a new UK-China trade working group also took place to “lay the foundations for a deeper future trading relationship ahead of the UK leaving the EU”. The UK Treasury, which led the envoy, reported that progress was made on reducing tariffs on a range of food, retail, and pharmaceutical goods, and in steps towards China lifting its ban on UK beef exports, which came into place following the BSE crisis in the 1990s.
Boost to Belt and Road Initiative
The UK also committed to getting more involved in China’s Belt and Road Initiative (BRI). Former chairman of HSBC, Douglas Flint, was announced as the UK’s London City envoy to the BRI, while a City expert board will also be established to bring together infrastructure financing and professional and emerging market expertise.
The move, which aims to help secure commercial opportunities for UK firms, was supported by UK Export Finance (UKEF) promising £25bn-worth of loan guarantees to support any UK businesses that begin exporting goods and services to BRI countries in Asia.
GTR has learned that the funds will not be limited to guarantees but could be provided across the UKEF product range, including direct loans and overseas investment insurance, as well as trade finance and insurance for UK exporters.
Following the 2016 autumn statement, UKEF has increased its country limits for a number of BRI countries, including Kazakhstan, Malaysia, Philippines, Bangladesh and Pakistan.
UK minister for investment, Mark Garnier says: “We’re putting export finance at the heart of trade promotion by making up to £25bn available for projects in these markets. The capacity will ensure that no viable company fails for a lack of funding and means they can take advantage of growing economies and secure deals that will boost the UK’s exports and safeguard jobs at home.”
The UK also agreed to contribute US$50mn to the Asian Infrastructure Investment Bank’s (AIIB) fund for low income developing member countries. The money will be deposited in the Project Preparation Special Fund (PPSF), which provides grant support for infrastructure projects. The PPSF was established in June last year. So far, China and South Korea have committed US$50mn and US$8mn, respectively.
The UK and China also discussed opportunities to collaborate on the UK’s new industrial strategy with the launch of a new UK-China science, technology, and innovation strategy. The two sides made a pact to work collaboratively on ultra-low emission vehicles (ULEVs), including a commitment to develop elements of the ULEV supply chain in the UK.
The two countries also announced proposals for a bilateral UK-China investment fund with an initial round of US$1bn. The fund will be led by a number of institutions in the UK and China and by former UK prime minister David Cameron. Funds will be used to invest in innovative, sustainable and consumption-driven opportunities in the UK, China and third markets.
On the energy projects front, the countries signed an action plan to further co-operation on clean energy. Agreements were made between UK and Chinese businesses and research organisations. Pacts included the UK’s offshore Renewable Catapult linking up with TusPark Newcastle and TusWind for offshore wind technology development, while UK-based engineering consultancy Mott Macdonald and the China Energy Engineering Corporation agreed to work together in third countries on renewable energy projects.