The start of a new 'special relationship'?

The relationship between the UK and China continues to blossom as London aims to be the main centre for Chinese offshore banking, with significant implications for wealth managers.
The start of a new 'special relationship'?

For many years, the US and UK have spoken of their ‘special relationship’, an allusion to the strong economic and diplomatic ties between the two countries. With the announcement of new trade and business sanctions between the UK and China, it appears that a close friendship between East and West is also evolving, one that could also signal a number of developments for the wealth management industry.

During a state visit to China, UK chancellor George Osborne outlined a series of new developments to improve interaction between the two countries. Under the scheme, the cost of investing in China will be greatly reduced for UK investors, who will be allowed to apply for a licence to use the RMB to invest directly in Chinese shares and bonds, rather than having to route their investments through Hong Kong. 

The developments are part of Osborne’s grand plan to make London the main centre for Chinese offshore banking. Alongside the changes for British investors, the UK has also relaxed rules for Chinese wholesale banks looking to set up in London. In the wake of the financial crisis, Britain had only permitted foreign lenders to set up their UK operations as “subsidiaries” rather than branches, ensuring greater protection for UK depositors and tax payers.

And it is not just Chinese corporates that the Brits want in town. New legislation will streamline UK visa applications for Chinese tourists and business travellers. The UK-China Visa Alliance estimates existing visa rules result in the loss of £1.2 billion ($1.9 billion) of potential tourist spending a year from Chinese visitors. Britain, it seems, is losing out to a huge share of possible investment too.

And this is certainly not down to lack of interest from the Chinese, who have been exploring existing avenues to invest in the UK. According to the UK Border Agency, some 109,000 Chinese are resident in the UK.

Over the last two years, the Chinese have become the most frequent applicants to the UK investor visa – a tool to attract foreign high-net-worth individuals wanting to make substantial investment in the UK. They have also become regular candidates for entrepreneur visas, which enable high value and highly skilled individuals wanting to contribute to business growth in the UK’s favourable economic environment.

Of course, if Osborne’s plans to bring even more wealthy Chinese businessmen to British shores are successful, there could be wider implications for the UK wealth management industry. In addition to more cross-border investment opportunities for UK investors, it is likely that the Chinese HNW community could develop as a significant segment in its own right.


Chinese applications for UK investor visas and UK entrepreneur visas

Source: UK Border Agency, 2013






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