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China asks Britain to cooperate amid investment rule proposals

China asks Britain to cooperate amid investment rule proposals

China's Foreign Ministry is hopeful that the UK will continue to be a prime investment hotspot for overseas companies despite new British proposals that aim to curb foreign takeovers to protect national security.

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By Charles Bliss 25.07.2018

China’s Foreign Ministry is hopeful that the UK will continue to be a prime investment hotspot for overseas companies despite new British proposals that aim to curb foreign takeovers to protect national security.
 
Britain has traditionally been a more open and fair investment environment for Chinese enterprises, especially when compared to countries such as the United States and Germany, who have adopted a more protectionist approach for some time.
 
This could be about to change, as Britain has set out plans that will give it the power to unwind or block investment from foreign third parties. These plans come amid growing concerns that outside spending in security-centric sectors such as technology and defense could threaten security at a national level.
 
Any pivot toward tighter foreign investment rules would be a notable change for Britain, as it is currently among the most open markets for mergers and acquisitions involving overseas companies. However, a shift for the world’s fifth-largest economy would not be surprising because it would mirror similar efforts made by other western countries.
 
Australia has recently changed its policy in response to concerns about growing levels of investment from China, and Germany has also strengthened its rules. In response, China’s Foreign Ministry urged Britain not to pursue large-scale protectionism and to do its best to provide a just environment for outsiders.
 
When asked about the potential changes, Chinese Foreign Ministry Spokesperson Geng Shuang said that a system capable of “objectively” viewing companies and their “normal commercial activities” would be preferable. It is not yet known when any new policies may come into force.
 
"We hope the British side can take actual steps to promote trade and investment liberalization and convenience and take actual steps to oppose any form of trade and investment protectionism," Geng added.
 
UK Prime Minister Theresa May has adopted a more cautious attitude toward deals involving foreign companies in Britain since coming to power back in 2016. May hit the pause button on a lucrative Hinkley Point nuclear power plant project two years ago, a deal funded in part by China and built by EDF, a utility group controlled by the French state.
 
She eventually relented and approved the deal but said after that decision that the British government would likely adopt a more conservative outlook when considering foreign investing moving forward. This is a blow to China, as it has appreciated the open and fair environment that Britain offers for investment, and the new rules suggest that May’s government is now doubling down on its aims.
 
China’s call to the UK came as President Xi Jinping promised a further $14.7bn investment in South Africa during a visit to the country on Tuesday. The commitment will go some way toward easing concerns about the state of South Africa’s economy, which continues to struggle despite a wave of optimism among investors earlier this year.
 
President of South Africa Cyril Ramaphosa replaced scandal-hit predecessor Jacob Zuma in February and has been working hard to stimulate growth. The latest pledge from China takes total investment from overseas economies to $35bn for just this month, and Ramaphosa said that it is important to “work as partners” moving forward.
 
“We have agreed that we must work as partners to improve the lives of our peoples by elevating our business, commercial and trade ties,” Ramaphosa said during a joint news conference with Xi on Tuesday. Xi said that China would also attempt to increase imports from South Africa with further “active measures”.
 
Ramaphosa and Xi will be present at the BRICS summit in Johannesburg later this week, where further investment pledges are likely to arise.

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