Will Britain's China Push Benefit Its Law Firms?

, The Asian Lawyer


Britain - China

Over 200 years ago, Lord Macartney set sail to China in the hopes of opening more of the Middle Kingdom up to trade with England. The mission was a failure, as the Emperor Qianlong declared his celestial dynasty needed nothing the faraway island could produce.

George Osborne, the British chancellor of the exchequer, and Boris Johnson, the mayor of London, invited obvious comparisons with the 18th-century mission when they both journeyed to China this month with the explicit aim of boosting their nation’s trade with Asia’s rising economic giant. U.K. law firms are betting that they will meet with greater success than Macartney did.

In an Oct. 14 speech at Peking University, Osborne told the audience: “There is no country in the West more open to investment—especially from China.”

So far, though, the United Kingdom lags behind other Western nations in business with China. According to data collected by Mergermarket, China outbound investment in the U.K. was valued at $4.2 billion in 2012. Meanwhile, Australia saw $4.5 billion in Chinese investment, despite being a much smaller economy; the U.S. had $11.9 billion. In 2011, according to China’s National Statistic Bureau, British exports to China totaled $14.5 billion. That compared to France’s $22 billion, Germany’s $92.7 billion, and America’s $122 billion.

The recent push by the British government is aimed at changing that.

“It’s definitely a good thing for British firms,” says Lynia Lau, a Hong Kong partner at British firm Clyde & Co. She expects more Chinese investments and acquisitions in the U.K., especially in infrastructure and construction.

That sector has indeed recently seen some major deals out of China. Freshfields Bruckhaus Deringer advised Dalian Wanda Group on its recently announced $1.1 billion project to build London’s tallest residential skyscraper. Shanghai-based Zhongrong Holdings Group will invest $807 million in the reconstruction of the Victorian era’s Crystal Palace, which burned down in 1936. Beijing’s Advanced Business Park plans to build a $1.6 billion office complex at London’s Royal Albert Dock.

Osborne’s trip promised more to come. He revealed that China’s Beijing Construction Engineering Group would take a 20 percent stake in a $1.3 billion project for the creation of business district around Manchester’s airport, which was advised by Eversheds. During a visit to a nuclear power plant in China’s Guangdong province, the British treasury chief announced that two Chinese state-owned companies, China National Nuclear Corp. and China General Nuclear Power Corp., were taking a 40 percent stake in a project to build Britain’s first new nuclear power station in almost two decades.

Alan Wang, a Beijing partner at Freshfields Bruckhaus Deringer, says Chinese investors, put off by the troubled Eurozone, have been encouraged by Britain’s open markets, mature legal system and London's status as a world financial center. British officials have also tried to depict the U.K. as a friendlier destination for Chinese investment, with fewer national security hang-ups than, say, the United States.

The chancellor pointed to a $2 billion investment in the U.K. by Shenzhen-based networking giant Huawei Technologies Co. Ltd., including a $200 million research and development facility. Huawei has seen a number of U.S. deals blocked due to concerns about founder Ren Zhengfei’s ties to the Chinese military. Australia also prevented Huawei from bidding on a national broadband project over cybersecurity concerns. Osborne alluded to these actions while he was in China.

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