Putting great store in ties

08:26, November 10, 2010      

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Premier Wen Jiabao accompanies British Prime Minister David Cameron as they review a guard of honor at a welcome ceremony in the Great Hall of the People in Beijing on Tuesday. Wu Zhiyi / China Daily



British Prime Minister David Cameron (left) leaves a Tesco store, his first stop after arriving in Beijing on Tuesday. Darren Staples / Reuters

Cameron leads high-profile British delegation in a bid to expand trade with China, report Xin Zhiming and Qin Jize in Beijing and Zhang Haizhou and Zhang Chunyan in London.

He may have flown halfway around the world but David Cameron found himself in familiar surroundings when he arrived in China on Tuesday - a Tesco supermarket.

The chain's trademark red-and-blue sign is ubiquitous in Cameron's home country, although the British prime minister will no doubt have noticed a few subtle differences with the store he visited after landing at Beijing Capital International Airport.

Instead of the usual bread and biscuits in the United Kingdom, the store in Beijing's eastern Happy Valley area is stocked with foods popular with Chinese customers, meaning more fresh fish and noodles.

This ability to adapt to a very different market has proved a real strength for Tesco, whose executive director, Lucy Neville-Rolfe, is part of the largest-ever British delegation to China.

The company has become an increasingly common sight in cities on the Chinese mainland since opening its first store in 2004. Today, it boasts 99 outlets and is planning a 2-billion-pound ($3.2 billion) investment over the next five years, according to media reports.

It is this kind of success that many of the more than 40 other business leaders, part of the visiting delegation, are keen to replicate.

Cameron, who is also accompanied by four ministers (Chancellor of the Exchequer George Osborne, Business Secretary Vince Cable, Secretary of State for Energy and Climate Change Chris Huhne and Education Secretary Michael Gove), stated before leaving London that the mission of his two-day visit to China, his first since he took office, was to boost trade between the two nations.

The prime minister said he plans to more than double British exports to China over the next five years from their current level of 7.7 billion pounds to 18.5 billion pounds by 2015.

A number of deals had already been announced, including measures to boost sales of Scotch whisky and allow the import of breeding pigs into China. But the highlight on Tuesday was a $1.2-billion tie-up inked by China Eastern Airlines and Rolls-Royce for 16 Airbus 330-200 jet engines.

The signing was witnessed by Cameron, who met Premier Wen Jiabao for afternoon talks at the Great Hall of the People to discuss ways to boost trade.

Beijing is expecting London to expand cooperation in the fields of high-end manufacturing, innovation industry, finance service, energy saving and environmental protection, said Wen during the meeting. He also urged Britain to further release the restrictions on high-tech exports to China, a move that would be conducive to more balanced and sustainable bilateral trade growth.

The Chinese premier reaffirmed his nation's commitment to intellectual property rights protection, vowing to provide a more transparent, regulated and convenient environment for investment. He also promised to encourage more Chinese investment in Britain, calling for a simple administrative process, more targeted service and easier visa application.

In response, Cameron said Britain views China's development as an opportunity and welcomed Chinese companies' participation in the UK's infrastructure construction.

In 2009, UK exports to China increased by 6.2 percent year-on-year, despite trade with other countries dropping dramatically due to the global financial crisis.

In the first three quarters of 2010, British investment in China also expanded by 43 percent year-on-year, according to Sun Yongfu, director-general of European affairs department for China's Ministry of Commerce.

"Overall, the Sino-UK relationship has been stable, especially compared to relationships with (other nations in) Europe. It has always been very practical," Tian Dewen, an expert on UK studies at the Chinese Academy of Social Sciences, told China Daily.

Cameron is scheduled to meet President Hu Jintao on Wednesday to focus on the topic of the G20 summit in Seoul, the South Korean capital, this week. He will leave Beijing later that day after giving a speech at Peking University.

A perfect fit

Also on Tuesday, Vice-premier Wang Qishan and Osborne jointly chaired the third China-UK Economic and Financial Dialogue and announced a slew of cooperative programs for the coming years, including in the areas of trade, finance, high-technology, infrastructure, low-carbon economy and cutting emissions.

China is the world's largest exporter of goods while Britain is the second largest exporter of services, which means the two have promising cooperative opportunities in a wide range of fields, Osborne told the media after the meeting. "Our economies are complementary," he said.

The dialogue also achieved 41 policy outcomes, with both sides agreeing, among others, to promote bilateral trade and investment. The UK said it would welcome more Chinese investment, including from sovereign wealth funds.

That could be a positive signal for China's $200-billion sovereign wealth fund, China Investment Corporation (CIC), said analysts.

The CIC has been shown the cold shoulder in some countries because it is feared that the financial giant could disrupt markets and grab key resources, despite its reiteration that it is aimed at long-term investment that would stabilize financial markets.

Britain also affirmed that it would support China's full market economy status "as early as possible" and will continue to "play a constructive role to encourage EU recognition", according to a statement released following the dialogue.

Analysts claim that developed economies, such as the United States, have taken advantage of China's lack of such a status to impose trade measures more easily on Chinese exports.

China and Britain will also strengthen cooperation in taxation policies, statistics, energy, finance and civil aviation, reads the statement.

Words of warning

Outside of the Great Hall of People in Tian'anmen Square, the flags of China and Britain flew side by side - and it is in this fashion that the two nations have vowed to push global economic recovery.

"The priority (for the world) is to enhance macroeconomic policy coordination, oppose all types of protectionism and avoid economic issues from being politicized to benefit all-round recovery of the world economy," said Vice-premier Wang Qishan.

However, experts warn the recovery could be jeopardized by the quantitative easing policy of the US as it may push up inflation in the developing countries and cause chaos in the financial markets.

"The large amounts of capital into the emerging market economies will lead to rising inflationary risks," said Wang during the China-UK dialogue.

The US Federal Reserve has released its latest quantitative easing policy by buying $600 billion in government bonds to keep borrowing costs near zero and prop up the ailing economy. A number of countries have expressed concern about the expected liquidity boom.

China and Europe may discuss the impact of the quantitative easing at the G20 summit in Seoul.

Capital inflows into developing countries have been increasing rapidly, reaching $46.4 billion by the end of October, compared to a total of $9.4 billion in 2009, according to EPFR, the global fund tracker.

Thailand has imposed a 15-percent withholding tax on interest and capital gains earned by foreign investors on Thai bonds, while South Korea has asked banks not to lend in foreign currencies.

China's foreign exchange regulators also vowed on Tuesday to take new measures to control abnormal cross-border capital flows.

The State Administration of Foreign Exchange (SAFE) said it will force banks to hold more foreign exchanges and strengthen auditing of overseas fundraising as part of its efforts to clamp down on inflows of "hot money", or speculative capital.

The foreign exchange regulator said in a statement that it will tighten management of banks' foreign-debt quotas and introduce new rules on currency provisioning. The government will also regulate Chinese special-purpose vehicles overseas and tighten controls on equity investments by foreign companies in China.

"Some international funds will flee from dollar assets because of the (US) Fed's easing, and China's SAFE is trying all means to plug loopholes in possible channels for hot-money inflows," said Zhao Qingming, a senior financial analyst at China Construction Bank in Beijing, the country's second-largest lender.

The statement also said that a bank's daily net dollar positions, in expired forward contracts and spot greenback holdings, should never be less than the previous day's levels. Forcing banks to keep hold of the US currency will limit their ability to meet orders for yuan purchases, say analysts.

"This is to ask banks to hold more foreign currency to help ease pressure on the growing size of China's foreign exchange reserves," Zhao said. "To some extent, it can help limit yuan gains in the short term."

China's foreign exchange reserves reached $2.65 trillion by the end of September. The yuan, meanwhile, has risen continually since mid-June, further stoking the fire for capital inflows.

China called for responsible policies from the developed economies.

"The world economies should take responsible fiscal and monetary policies (to help global economic recovery)," said Li Dongrong, assistant governor of the People's Bank of China, the central bank.

China and the UK both agreed at the dialogue that the G20 should be the premier forum for international economic cooperation and major international institutions, such as the International Monetary Fund, should continue its reform process.

"Both sides agree that the heads and senior management of the international financial institutions should be appointed on merit, with no regards for nationality and that (their) staffing should be diversified," read a statement issued after the meeting.

Ai Yang in Beijing, Bloomberg and Reuters contributed to this story.



A general view of the third China-UK Economy and Financial Dialogue at Diaoyutai Guest House in Beijing on Tuesday. British Prime Minister David Cameron is leading a heavyweight group of British politicians and business chiefs on a visit to China, with the visit focused squarely on expanding trade ties with the world's second-largest economy. The delegation leaves on Wednesday. Jason Lee /Reuters



Premier Wen Jiabao welcomes members of the United Kingdom's largest-ever delegation to China ahead of talks at the Great Hall of the People in Beijing on Tuesday. Xu Jingxing / China Daily

(Editor:黄蓓蓓)

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