Should I bet for your company? A guide to invest in the UK for Chinese companies
Chinese investment in the UK stays strong despite Brexit uncertainties, investors still find attractive all the possibilities that UK businesses provide in a large range of key sectors.
Current China- UK economic and commercial ties are deeper and more robust than any other time in history, Britain was the largest recipient of Chinese outbound foreign investment last year, surpassing the United States, which has historically been the biggest recipient.
According to a report of Baker Mckenzie, last year Chinese FDI outbounds with the UK stood 4.94 billion pounds followed by 4.8 billion with the US, but these figures have decreased regarding 2017 investments due to some turbulence in the global economy such as trade tensions with the US and political uncertainties with the Brexit deal. Nevertheless, Chinese investors are committed to the UK market and trades are expected to grow.
Which are the best sectors to invest?
“Public perception of Chinese companies is hugely important. It can determine if a deal can happen, and can impact on dealer prices. It also impacts on the regulatory approval process and the success of post-merger integration.” Peter Zysk, director at business advisory company Brunswick Group in Beijing
Chinese investment should be separated into two categories: state-owned enterprises (SOE) and private companies. The private Chinese-owned companies grew 71% whereas SOE’s grew an average of 174%. However, private enterprises are more likely to invest broadly in sectors such as technology media and telecoms, and secondly, most popular sectors for Chinese enterprises are travel, hospitality and manufacturing.
Chinese companies are seen to be rising, not only in UK investment but globally, UK companies hold positive attitudes towards China’s innovation and technological businesses. But there are yet some challenges remain, Chinese firms undervalue the importance of communication, putting their global ambitions at risk. Companies need to better communicate their mission and core philosophy for a better understanding of their goals and strategies in order to thrive in the new content of trade post- Brexit with UK business.
A survey conducted by Brunswich group showed how comfortable would be English companies with mergers and acquisitions of Chinese companies in their country:
Technology is again chosen to be the best option for Chinese businesses to bet if they want to expand or invest in the United Kingdom, a situation reinforced by the tightening policies between China-UK trades.
How to succeed in the UK?
“Chinese companies should do more to fully understand the UK market, regulations and businesses practices” Peter Williamson, honorary professor of international management at Cambridge Judge Business School
Moreover, to succeed in the UK, Chinese businesses should operate in the context of a culture and compliance regime which is very different from China’s own. Some of the challenges are:
- Identifying the best deals
- Navigating regulations
- Tax requirements
- Adjusting to different working practices
Having this in mind and understanding the differences between how Chinese and British companies do business can help Chinese investors operate more successfully in the UK market. Here are some tips by Simon Bevan, Partner, Head of China Britain Services Group London:
Want to know what are the expectations for UK-China trading 2020?
Law firm Baker Makenzie latest report on Global Transaction Forecast explain investors and corporations an overview of the latest global deals landscape, including predictions for M&A and IPO activity during 2020–2022. With their interactive tool, you can place China in a scenario of Brexit deal and look at what are future expectations of trading with the UK. Full report here.
