Vital intelligence on Anglo-Chinese trade
China
Area 9,596,961 sq km
Population 1,339m
GDP $7,973trn(PPP: $6,000)
GDP growth 9% (2008)
Inflation 5.9% (2008)
Internet users 253m
Unemployment 4%
Foreign direct investment $92.4bn
Briefing
The trade relationship between China and the UK began over a cuppa. In the early 16th century, the British were keen to exploit the country’s imagined treasures. After several attempts, the East India Company finally secured a post in Taiwan in 1672, trading in tea, porcelain and silk. By the 18th century, most of Britain’s Chinese imports consisted of tea.
Fierce opium wars in the 19th century soured trade relations, and Chinese exports – particularly in high quality clothing items – fell as European production output improved in the wake of the Industrial Revolution.
Until around 25 years ago, China was primarily an agrarian economy. Today, it makes 25% of the world’s washing machines, 50% of the world’s cameras and 90% of toys. The UK is China’s third largest trading partner and Peter Mandelson’s visit in September 2009 was credited by the British Government with securing an additional $500m worth of investment deals.
Foreign Direct Investment (FDI)
In 2008, China attracted $92.4bn in FDI, a rise of 23.6%. Global recession knocked that figure considerably (it slumped by 20.3% in the first half of 2009), but September saw investment rise 7%.
The UK is the top EU investor in China, with a realised investment value of $15.82bn from 6,264 projects. Significant UK inflows include RBS/Merrill Lynch’s $3.1bn investment in the Bank of China, BP’s $2.5bn plant in the Shanghai area and AstraZeneca’s Innovation Centre in Shanghai. Vodafone is also one of the top 20 foreign investors.
China returns the favour, with London ranking as the most popular destination for Chinese companies expanding into Europe. Since 2002, London has attracted 15% of all Chinese FDI into Europe. By 2008, 372 Chinese companies had chosen the UK as home for their European operations and Chinese investment into the UK by stock reached $972m in March 2009.
Imports/Exports
Trade between the UK and China has shot up since China joined the World Trade Organisation in 2001 – and that helps explain British politicians’ interest in nurturing a fruitful relationship.
The country has been the UK’s fastest growing export market since 2002 and in 2007 became the largest market in Asia for British goods. That year, the UK exported £3.781bn of goods to China, including power generating machinery, electrical and mechanical equipment, vehicles, plastics, wood pulp and pharmaceuticals. The ICT industry accounts for 25% of the total. Despite progress in fighting piracy, however – sales of counterfeit software in particular have plummeted – fake goods are openly on sale in many cities.
Trade in goods is almost 5:1 in China’s favour, reflecting its advantage in low-cost mass production. In 2008, China’s global exports totalled $1.4 trillion, $36.1bn of which ended up in the UK. The main exports to these shores include clothing, toys, electronics and office and telecoms equipment.