Tag Archives: London

Crystal Palace To Rise Again


The front entrance of the original Crystal Palace, London, 1851

Word arrives from our man in London that not content with building replicas of little bits of Britain (and elsewhere) in China, one Chinese developer plans to build a replica of Britain’s iconic Crystal Palace on its original South London site.

Shanghai-based ZhongRong Group intends to recreate the cast iron and glass structure that was built for the Great Exhibition of 1851. At the time it was the largest glass structure in the world and a projection of Victorian Britain’s imperial and manufacturing power. The building was first located  in Hyde Park in central London. It moved three years later to what was then if no longer a semi-rural part of south London, giving its name to the area. Fire destroyed it in 1936.

The Phoenix version will be used as a cultural attraction and exhibition space. Work on the £500 million project is expected to start the year after next.

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Chinacity London

London  dreams of being an offshore center for yuan trading as the Chinese currency edges towards convertibility. Just down the road from London’s traditional financial centre, the City, and even closer to its newer version, Canary Wharf in London’s Docklands, Chinese money and a U.K. developer are planning to build a business park to house Chinese firms. London’s mayor, Boris Johnson, is already rather grandly billing it as London’s third financial center. A new Chinatown more like.

The £1 billion ($1.5 billion) redevelopment of a derelict 14-hectare site at the old Royal Albert Dock in east London is said to be the biggest Chinese commercial real estate investment in the U.K. to date. Xu Weiping’s brownfield sites real estate company, Advanced Business Park (ABP), is putting up 30% of the development’s £1 billion ($1.5 billion) price tag, with at least as much coming from private equity and bank loans and the remainder from pre-sales.

The complex of offices, homes and shops — ABP sees it as a city within a city — will be built in three to five phases over 10 years, starting with 56,000 square metres of office space planned to be available from 2017. Chinese banks are likely first occupants. ABP is building similar and larger projects in Beijing, Shenyang and Qingdao.

U.K. firm Stanhope will be the development manager on the London project. The master-planner will be Terry Farrell, the U.K architects that designed Kowloon Station and Peak Tower in Hong Kong and the new Guangzhou Station; it is also working on the Z-15 project which will include the tallest building in Beijing.

That offers some hope of a project of some grandeur for a site that needs regeneration. The Royal Albert stopped being a working dock in the 1980s. It is now mainly used for rowing and other water-sports, though London’s City Airport sites on its southern side. Passengers might not realize it, but the Royal Albert’s old dry dock is under the runway.

Advanced Business Park will lease the site from the Greater London Authority until the development is completed, at which point it will acquire the freehold. It just might be that the yuan becomes fully convertible around the same time.

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London Expands As Offshore Yuan Center

Last year, the British and Hong Kong governments agreed to promote London as a center of trading offshore yuan. This week, some meat was put on the bones of that agreement with the issue of a three-year yuan-denominated bond in London. HSBC was the lead on the deal, the first so-called dim sum bond to be issued outside China. It raised 2 billion yuan ($317 million), mostly from European investors, and yields 3%. Demand from investors was so heavy that HSBC doubled the bond from its originally planned size.

Yuan-denominated deposits in London totaled 109 billion yuan at the end of 2011, according to a report commissioned by the financial district’s government and published to coincide with the launch of a working group to develop London as the western hub for offshore yuan business. The group includes HSBC, the biggest issuer of dim sum bonds in Hong Kong, and Bank of China.

London’s is a sufficient pool of liquidity to start supporting a bond as well as a foreign-exchange market, but it is still less than a fifth of the 566 billion yuan in renminbi deposits in Hong Kong as of February. Despite the strong push London is making, Hong Kong remains the leading offshore yuan market, as Beijing desires. Singapore and New York also have designs on the business but London has stolen a march on them.

China’s doubling of the yuan’s trading band and other recent financial reforms, including allowing banks to hold short dollar positions, raising the ceilings on foreigners’ equity and bond investments in China, and a trial of giving domestic Chinese investors more access to offshore yuan markets, are all part of Beijing’s drive to expand the international use of its currency that started in 2008. More optimistic financial reformers have pencilled in 2015 for full convertibility. The more cautious fear that would be a destabilizingly quick timeline, especially if GDP growth continues to slow.

If the on- and offshore interbank markets forge a close link, that could force the pace. However, the offshore market is still in its infancy. Baby steps are yet to be made. In June, Hong Kong plans to extend its yuan payments trading to overlap with London hours. For its part, London is working on setting up local yuan clearing and settlement systems, probably piggy backing off Hong Kong’s. More European banks are expected to follow HSBC’s lead in issuing dim sum bonds in London later this year, as are the Agricultural Development Bank of China, China Development Bank and the Export-Import Bank of China.

Other yuan-denominated investment products will likely follow. But how fast London, or any other financial center, can develop as a hub of offshore yuan trading, will ultimately be determined by how quickly Beijing opens its capital account and lifts its foreign exchange controls so there is a sufficient volume of internationally circulating yuan to support the business. At present for every yuan deposited outside China, there are 99 inside.

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China: One Currency; Two Yuans

London has made more than one fortune on the China trade, though they have not all ended happily. Whether the yuan will end up as the new opium is the question raised by George Osborne, Chancellor of the Exchequer as the U.K. calls its finance minister, who has been in Hong Kong to promote a scheme to make London the leading international center for trading in China’s currency. London and Hong Kong have been talking about how to do this since last summer. Osborne’s trip will continue the talks.

Chatham House, a think tank in London, has forecast that trade transactions settle in the currency would reach the equivalent of $1 trillion by 2020. Yet, while Beijing has been taking baby steps towards making the yuan a fully convertible currency, there is still a long, long way to go. It remains an aspiration as much as anything but also a hostage to the pace of financial reform, which, as we have noted before, is in stasis during the leadership transition. China may need to rebalance its economy away from export- and investment-led growth and towards domestic consumption, for which financial system reform is a necessary if not sufficient condition, but vested political interests stand in the way. For all the wishful thinking in some parts, the Chinese currency is far from displacing the dollar as the world’s reserve currency, or even having the standing of the yen or the euro in such circles.

If anything, the surprise is that the offshore market for yuan is as large as it is (yuan deposits in Hong Kong total the equivalent of $80 billion). Normally the deepening and development of domestic financial markets and the easing of capital controls is prelude not postscript. In China, the first two are so difficult that the third is the easier option, even if by having a government controlled onshore yuan market in China and market driven offshore yuan market in Hong Kong and London, China may well end up, not untypically, with one currency but two yuans.

London, of course, will be happy to take its skim off both.

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When Beijing Betters London And Shanghai LA

A McKinsey Global Institute ranking of the world's top 50 cities by GDP in 2005

By 2025, Shanghai and Beijing will have higher GDPs than Los Angeles and London, a further sign of the world’s eastwards economic shift. The prediction comes from the McKinsey Global Institute, the economic research arm of McKinsey & Co., the international consultancy firm, which has been working on mapping the changing economic power of the world’s metropolitan areas, and is recirculating some work on this it first released in March. Shanghai is already among the world’s top 50 cities ranked by GDP, but as well a Beijing, Chengdu, Chongqing, Foshan, Guangzhou, Hangzhou, Nanjing, Shenyang, Shenzhen, Tianjin, Wuhan and Xian will all join it by 2025, McKinsey predicts. European cities will be most numerous among the dropouts, but another will be Taipei.

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Huawei Performs U-Turn On CFIUS Review

If Huawei Technologies’ decision to contest a U.S. national security review rejecting its acquisition of patents from 3Leaf Systems was perplexing, its U-turn to accept it is a surprise. The company says it has changed its mind because of the controversy around its earlier decision to throw itself on the mercy of an executive ruling by President Barack Obama after the Committee on Foreign Investment in the United State (CFIUS) had recommended the deal be unwound. We had thought that the company might have had some backing from Beijing for its extraordinary initial position, and earlier this week a commerce ministry spokesman called for Washington to make its national-security reviews more transparent. Maybe this was all just testing the waters of Sino-American relations and finding them a bit too choppy.

Update: A bit of backwash from state media, suggesting the U.S. has overreacted in this case.

Further update: Reports from London (here via the FT) say Huawei is offering to give London’s metro system a free mobile wireless system in time for the London Olympic Games in 2012, an ‘Olympic host to Olympic host’ gift that it is estimated would cost the company upwards of $80 million. The inevitable national security concerns about a Chinese company running such a network in London have already been raised, but we do wonder what might be said it they had proposed the gift for the Metro in Washington, D.C. instead.

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Bright Future For Container Housing

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Looking for some pictures of the flooding in Hainan, we came across this shot of a factory dormitory for 40 workers in Chengmai in the north of the island built out of 10 recycled shipping containers.

Using containers to create housing, offices, shops and even art galleries is nothing new, of course. In one sense, it is only an updating of the old prefabs, but it has gained a certain currency these days for being both environmentally friendly and cheap. And there are more than 100 manufacturers of container housing in China already. But container living doesn’t need to be drab as the view below of Container City in London shows.

Click through the picture to see the decade-old Container City’s gallery of photographs.

Given the combination of China’s switch from export-driven growth and its stratospheric land prices, we’d like to think that container housing could have a brighter future in the country.


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CIC Welcome

While the electioneering U.S. takes China’s and other sovereign wealth fund’s capital but frets about foreigners buying America, the U.K. is courting it. British prime minister Gordon Brown, now visiting Beijing, told his counterpart Wen Jiabao that he would like the China Investment Corp. to set up an office in London as a base from which to invest some of its $200 billion.

True, this is part of London’s continuing battle to one-up New York as the world’s financial capital, but the U.K. has clear attractions for China as an investment front door into the EU. China has an interest in buying into companies with expertise in financial services and with technologies it needs to develop its 20 champion industries. Europe has both, and on the tech side, green technologies in particular. Plus at a time of economic uncertainty, there are companies there going cheap, just as there are in the U.S.

As former Citibank chairman Walter B. Wriston said, capital goes where it is needed, but stays where it is welcome.

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Filed under China-E.U., China-U.S., Economy, Markets

London Quietly Calling Capital

Amidst the megashare offerings recent and coming to the Shanghai and Hong Kong exchanges, some Chinese companies have been slipping quietly off to Europe.

Xinhua quotes Chris Lu, a managing partner of accountants Deloitte, saying that since 2006 there have been seven initial public offerings by Chinese firms in London, two in Frankfurt and one at the Paris-based Euronext. China Medical System Holdings and China Central Properties were two that listed in London in June, for example. Lu says the purpose of Chinese companies’ listings is to “to build brand awareness and seek new talent aside from raising money”.

The European listings coincide with expanding Chinese direct investment in Europe, which now tops $1 billion a year, or 5% of China’s outbound investment.

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