China’s City banks create financing opportunities in UK infrastructure

Thursday, November 17, 2011 | Posted by: Fiona Cullinan
Categories: China | Tags: China, UK, infrastructure, trade, regulation, Nick Farr, London, financing, Chinese, banks, renminbi, caps, deregulation, Infrastructure Summit, subsidiaries

As Chinese banks gain a foothold in the City, this is creating opportunities for financing UK infrastructure and regeneration projects, says Nick Farr, Head of Grant Thornton’s China Britain Services Group.

Last week, China’s fifth largest lender, the Bank of Communications, opened its first subsidiary in London, in the financial district, next door to the Bank of England.

The expansion into the UK increases China’s foothold in more developed markets and is expected to improve cross-border business and provide global financial and wealth management services.

The Financial Services Authority (FSA), which granted the subsidiary a licence in July, is also working to loosen regulations on Chinese banks to enable Chinese renminbi reform and external trade deals to be settled in yuan.

It was reported last week, for example, that the City is edging closer to becoming the first offshore trading centre for the Chinese renminbi after the FSA began due diligence on a proposal to exempt Chinese banks “from regulations preventing the movement of large amounts of money to China”.

Currently, the rules impose strict caps, which make it prohibitive to route trade through Britain rather than European rivals. The Treasury hopes to lure Chinese trade through London if agreement can be reached on how much money can be moved out of the UK.

Nick Farr, Head of China Britain Services Group, said:

“Europe is looking to China for a bailout. While this may be optimistic thinking on the part of beleaguered Eurozone governments, there are real opportunities for financing from the Chinese banks setting up in the UK.

“Perhaps this is most evident in the area of infrastructure spend where there is close dialogue between the UK and Chinese governments, as evidenced by this month’s Infrastructure Summit. The summit highlighted the major opportunities – totalling some £200 billion – across offshore wind, future expansion of the rail network and major regeneration schemes, such as the Atlantic Gateway in the North West or Queen Elizabeth Park following the 2012 Games.”

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