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China-Europe Relations

UK seen highlighting market strength in talks with China

By Cecily Liu in London ( chinadaily.com.cn ) Updated: 2016-11-08 21:45:34
British officials are expected to highlight the strength of their country's financial markets when they meet their Chinese counterparts for annual talks on economic policy collaboration, overshadowed this year by uncertainties created by Britain's decision to leave the European Union.

Likely hot topics on the agenda of the 8th annual UK-China Economic and Financial Dialogue that opens in London on Wednesday are internationalization of the renminbi, the development of green finance, and other capital market investment issues.

As in previous years, Vice Premier Ma Kai will lead the Chinese delegation. The British side will be headed by Chancellor of the Exchequer [finance minister] Phillip Hammond, appointed after the June referendum vote to take Britain out of the EU.

A number of business conferences are taking place in the margins of the Dialogue, including forums on green finance and financial technology.

A focus of the UK position will be to underline its post-Brexit strategy to partners beyond Europe, according to analysts.

"Amid Brexit-related uncertainties, the UK is trying hard to send a message that its policies to deepen cooperation and forge new trade relationships outside Europe is working," said Danae Kyriakopoulou, head of research at the Official Monetary and Financial Institutions Forum (OMFIF) think tank.

Both sides are expected to lend their support to collaboration in sectors that include infrastructure investment, culture and education, tourism, health and high technology.

They were all issues that figured high on the agenda of the last round of talks in Beijing last year. But since then, Brexit uncertainties have increased the need for the UK to try to enhance its relationship with China and other economies outside the EU.

Since the Beijing talks, China successfully hosted the G20 Leaders Summit in Hangzhou and the International Monetary Fund's included the renminbi in its basket of special drawing rights currencies. Both developments will have a bearing on this year's bilateral dialogue, analysts said.

At the G20, the UK and Chinese central banks worked particularly closely in discussions on green finance. Policy leaders and bankers will follow up those discussions at the green finance forum on Friday.

The renminbi inclusion as an SDR currency is viewed as a milestone in its wider international use. "The UK could be an important partner in helping China raise the renminbi's profile, given its competence and experience in financial services," said Kyriakopoulou.

Infrastructure investment is another area where the two governments are likely to voice support. The UK faces losing infrastructure funding from the EU post-Brexit and Chinese investment has grown significantly in recent months, with nuclear power investment a primary example.

"The UK's infrastructure sector requires significant funding and the market potential for Chinese investment is huge," said Mike Wang, a London-based partner at the law firm King & Wood Mallesons. "Currently investment comes from large Chinese state-owned enterprises, but future opportunities exist for smaller Chinese small and medium size enterprises or property funds."

Jinny Yan, Chief China Economist of ICBC Standard Bank, said collaboration on investments along the China-led Belt and Road strategy and the further enhancement of London's position as an international financial center were two areas in which cooperation could deliver a win-win result.

"OBOR projects will need to leverage on London's financial services expertise," he said. "Secondly, London's dominance in RMB activities outside of Asia will also facilitate OBOR financing, as increasing volumes of settlement, investment and financing become directly denominated in RMB."

The UK's experiences in the public-private infrastructure financing model can help China to achieve similar success in cross-border project financing, Yan said.

Alan Barrell, entrepreneur in residence at Cambridge University's Judge Business School, said innovation and research and development would also benefit from support from the Dialogue. "The UK can help China develop the entrepreneurial ecosystems which have been so successful in enabling the commercialization of research," Barrell said.

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