U.K. Offers London as Base for China#39;s 200 Bln Fund (Update3)
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Jan. 18 (Bloomberg) — U.K. Prime Minister Gordon Brown
offered London as an overseas base for China Investment Corp.,
the nations $200 billion sovereign wealth fund, aiming to
encourage the worlds fastest-growing major economy to invest in
Britain.
“If CIC opened an office in London, that would help more
U.K. fund managers win mandates from the fund, said Ke Shifeng,
who helps manage about $5 billion of Greater China assets for
Martin Currie Investment Management in Shanghai. “It could also
drive CIC to take more equity stakes in British companies.
Chinas economy overtook the U.K. in 2005, and trade
between the nations may grow 50 percent to $60 billion by 2010,
according to a goal set today by Brown and Chinese Premier Wen
Jiabao. CIC, set up last year to seek better returns on Chinas
foreign-exchange reserves, plans to invest as much as $70
billion overseas.
“CIC setting up in London would foster closer ties and
help make it more willing to commit capital to British
opportunities, said Barry Livett, co-chair of financial
services at the British Chamber of Commerce in China and chief
executive of Abacus Corporate Finance.
China last year surpassed the U.K. as the biggest exporter
to the Eurozone and Brown wants to sell British luxury brands to
consumers, attract Chinese students to U.K. universities and
draw the countrys estimated 300 million soccer fans to the
English Premier League.
Crucial Relationship
“Amidst the global economys difficulties and turbulence,
the importance of China and our growing relationship is
absolutely crucial to the success of the global economy, Brown
said during his first China trip as prime minister.
China may surpass the U.K. as the second largest market for
Rolls-Royce luxury cars, the brands owner Bayerische Motoren
Werke AG said in April 2007. Rolls-Royce sold 75 cars in China
in 2006, half of the brands Asia-Pacific sales and about 10
percent of global sales.
“We can now sell China not just financial services, but
also a whole range of British brands that are becoming very
popular among the rising number of Chinese consumers, Brown
said.
CIC was established to manage part of Chinas $1.5 trillion
of foreign-currency reserves, the worlds largest. The Beijing-
based fund spent more than $8 billion last year buying stakes in
Morgan Stanley, the second-biggest U.S. securities firm, and
Blackstone Group LP, manager of the worlds largest buyout fund.
Sovereign wealth funds, which invest money controlled by
national governments, have taken stakes in banks including
Citigroup Inc. and Merrill Lynch %26amp; Co. in recent weeks. China
Development Bank has invested in Barclays Plc, Britains third
biggest bank.
Contracts Signed
“We welcome international investors, but they have to play
by our rules, Jon Cunliffe, a senior economic adviser to Brown,
told journalists before he and the prime minister left London.
“Were in favor of open investment, an open economy.
Brown, whose departure yesterday was delayed by a crash-
landing of another aircraft at Londons Heathrow airport, met
Wen this morning in central Beijing.
The two nations signed eight agreements worth a total of
$800 million to cooperate in education, climate change and
renewable energy, according to Xinhua News Agency. BP Plc and
China Petrochemical Corp. agreed to expand a factory in
southwestern China to produce acetic acid. HSBC Holdings Plc and
Arup agreed to help Shanghai Industrial Holdings Corp. develop
methods for financing the development of energy-sustainable
cities.
The two premiers agreed to allow Chinese companies to
double their initial public offers on the London Stock Exchange
in the next two years. Up to 15 Chinese companies currently
trade their stocks on the London exchange, according to
Bloomberg data.
Options Open
Virgin Group Ltd. founder Richard Branson, currently
seeking financing for his offer to buy Northern Rock Plc,
traveled with Brown. Branson said hes confident his bid will
succeed, adding he doesnt plan to talk with Chinese officials
about the matter.
“Im confident that the Bank of England can put a
proposition together that can save Northern Rock, Branson said
yesterday on board his flight to Beijing. “We are the only
serious contenders.
Brown has repeatedly said he is keeping all options open to
recover more than 25 billion pounds ($49 billion) in government
loans supporting Northern Rock, including nationalizing the bank.
The government would consider allowing a bid for the bank
financed by a sovereign wealth fund, Michael Ellam, a spokesman
for the prime minister, said on Jan. 10.
To bolster his economic message, Brown has brought along 30
chief executives from the U.K. including Philip Yea of 3i Group
Plc, AstraZeneca Plcs David Brennan and Arun Sarin of Vodafone
Plc. Barclays Plc Chairman Marcus Agius, Standard Life Plc
Chairman Gerry Grimstone and British Energy Group Plc Chairman
Adrian Montague are also on the trip.
To contact the reporter on this story:
Robert Hutton in London at
