Golden age for Sino-UK economic ties

Chinese President Xi Jinping (C) and his wife Peng Liyuan (3rd L) arrive in London, Britain, Oct. 19, 2015, for a state visit to Britain at the invitation of Queen Elizabeth II. [Photo/Xinhua]

The Sino-UK relationship has been on the rise over the past few years. On financial issues, infrastructure and nuclear energy, in particular, they have many interests in common. And with President Xi Jinping visiting the United Kingdom this week, their mutual economic cooperation will definitely be strengthened.

A key area for cooperation is the financial sector. The financial sector accounts for 8 percent of the UK's GDP and further supports the development of tourism, realty and other sectors. For the UK's financial industry, the renminbi is of great importance due to the enormous growth potential of RMB business.

The UK has long attached importance to RMB business, and it plans to build London into the biggest offshore RMB center. That's why it has taken the lead among European countries in strengthening financial cooperation with China: It was the first to sign a currency swap agreement with China, the first to issue financial products with prices labeled in RMB, and the first to found an RMB settlement bank and branches of Chinese-ventured banks. Its move of issuing RMB sovereignty debt in 2014 signals it recognizes RMB as part of its foreign reserve and symbolizes its trust in the currency.

For China, which is pursuing internationalization of its currency and restructuring of its economy, the UK is a good partner. In 2015, the Exchange-Traded Fund of China Construction Bank, the first RMB ETF was listed on the London Stock Exchange. In the future, China will also release RMB government debt in London to make it truly an offshore financial center. This will very possibly be announced during President Xi's visit.

The UK is also paying lots of attention to the Asian Infrastructure Investment Bank, the international financial institution initiated by China. It was the first European country to announce its willingness to join the AIIB. Due to its enthusiasm, the UK will hopefully play a key role in the financing, management, and other programs of the AIIB.

The northern parts of England fall relatively behind in terms of infrastructure, which is a bottleneck for UK's global competitiveness. In order to solve that problem the UK government set out an ambitious plan to invest 460 billion pounds ($710.2 billion) in infrastructure in the financial years 2014 to 2020. That means its current huge deficit will further enlarge. The UK government has been tightening its financial expenditure but it still needs external funds. Its production capacity will also be unable to meet the huge demand for infrastructure construction.

China can help the UK with both, and the UK has long been eyeing China as a possible source of support. The ruling Conservative Party in the UK has already discussed how to obtain Chinese investment to boost its economy in the north of the country, and it is expected the two countries will reach agreements on infrastructure construction during Xi's visit.

Nuclear energy is another attractive field for cooperation. The UK government takes it as a key means of securing energy security and as a solution to the challenge of climate change. In order to attract Chinese investment in Hinkley Point nuclear power plant, the UK government has offered 2 billion pounds as government assurance. Hopefully agreements will be reached in nuclear energy too.

The UK is also relatively open among European economies toward China and welcomes Chinese investment in sensitive industries such as telecommunications. UK Chancellor of the Exchequer George Osborne paid a tour to the headquarters of Chinese electronics giant Huawei in Shenzhen, Guangdong province, during his visit to China in September, during which he said the UK offered a sincere welcome to Chinese investment.

In 2014 alone, Sino-UK trade volume had reached $80.9 billion, 15.3 percent higher than the previous year, making the UK the second-largest trade partner of China within the European Union. And China's investment in UK is experiencing similar fierce growth.

Xi's visit will comprehensively strengthen the bilateral relationship and lay a solid foundation for what both sides are calling a "golden age". Economic and trade cooperation between China and the UK has a bright future to expect.

The author is a senior researcher at the China Institutes of Contemporary International Relations.