Tag Archives: U.K.

It Is An Ill Wind That Blow’s China’s Nuclear Industry No Good

CHINA’S STATE-OWNED heavy engineering firms are getting a liking for European renewables. China General Nuclear (CGN) Corp. has beaten out several rivals to acquire a controlling stake in three U.K. wind farms being sold by the French utility EDF.

This follows China Three Gorges Corporation acquisition of wind-generation capacity in Spain and Portugal to add to that it has in Pakistan. The State Administration of Foreign Exchange (SAFE), which also supervises CGN, owns 49% of the portfolio of wind assets belonging to the Norwegian state owned electricity company, Statkraft. This stake is held through SAFE’s U.K. investment arm, Ginko Tree Investment.

CGN, which generates more than half of China’s nuclear energy and was known as the China Guangdong Nuclear Power Group until last year, paid an estimated $157 million for 80% of the three wind farms. EDF will retain the remaining 20% and continue to operate the facilities.

The three farms, all in eastern or north eastern England, are CGN’s first significant acquisition of onshore wind generating capacity outside China. It has a small interest in an Australian wind farm but set up a subsidiary earlier this year to acquire off- and onshore wind farms and solar projects in Europe. The U.K. government runs a subsidy scheme that requires energy utilities to buy a certain amount of electricity generated by renewables, which makes U.K. projects an attractive investment.

The generating capacity that CGN will be acquiring is relatively modest at 72 megawatts, sufficient to serve only 40,000 homes. By way of comparison, the group has installed generating capacity of some 7 gigawatts of solar, hydro and wind power in China plus 11.6 gigawatts of nuclear power.

Not that China’s nuclear companies are turning their back on nuclear despite industry’s post-Fukushima hiatus. CGN has another 3.9 gigawatts of capacity under construction in China and is involved in the negotiations over Hinkley Point C, a new $40 billion nuclear power plant EDF is planning to build in the west of England. That would be the first nuclear power plant built in Britain in a generation. CGN and China National Nuclear Corporation also want to build another nuclear plant in eastern England that would controversially use a Chinese built reactor.

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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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The Dalai Lama Calculation

All Western leaders have to make a political calculation over the Dalai Lama: what is the value of showing support for human rights by meeting the exiled Tibetan spiritual leader minus infuriating China?

U.K. prime minister David Cameron seems to have got his reckoning wrong. Beijing cancelled a visit to Britain by Wu Bangguo, chairman of the National People’s Congress standing committee, after Cameron and Nick Clegg, deputy prime minister and leader of Cameron’s party’s coalition partner, met the Dalai Lama earlier this month when he was in London to receive the Templeton prize. The meeting was billed as private and held not on government premises but at St. Paul’s Cathedral during the award ceremony. Beijing still regarded this as an “affront to the Chinese people”, and launched “solemn representations” with London.

The symbolism of canceling a visit by Wu, who is second in the Politburo hierarchy, may be lost on many Britons outside diplomatic and Sino-centric circles, who likely won’t have heard of him and would be surprised to learn Wu outranks the prime minister they may have heard of, Wen Jiabao. Those in diplomatic and Sino-centric circles will be decoding where the cancellation ranks among rebukes. Wu is not only senior but also the most senior Chinese to travel to the UK in recent years, but his visit was going to be no more than a stopover en route to Europe. Nor was the cancellation officially announced. It only emerged after Wu’s trip had started.

France was given the cold shoulder after its then president, Nicolas Sarkozy, announced plans to meet the Dalai Lama in 2008. A China-EU summit he would have chaired was scuppered and new big-ticket commercial deals with France stopped for a couple of years, but then resumed. Smaller countries get harsher treatment. Norway, where the 2010 Nobel peace prize was presented to Liu Xiaobo, a Chinese dissident currently imprisoned for subversion, has yet to return to Beijing’s good books.

The U.K. may be commercially too important to China to be left standing in the corner for too long. London is making a great play to be the non-Asian trading hub for the yuan as Beijing pushes it towards a greater role in the international financial system. The only viable alternative to be London would be New York, a switch that would have officials in Beijing making a separate set of calculations of their own.

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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 Finds Justification For Social Media Censorship In UK Riots

Never waste a crisis, they say, even one not your own. China’s state media have been quick to jump on remarks by U.K. Prime Minister David Cameron in the wake of England’s “mass incidents” of recent days on the need to control the use of social media that were used to organize the riots and looting. From an article on Xinhua, entitled “Britain’s U-turn over web-monitoring“:

Learning a hard lesson from bitter experience, the British government eventually recognized that a balance needs to be struck between freedom and the monitoring of social media tools….

..the Internet is also a double-edged sword that cuts both ways. For the benefit of the general public, proper web-monitoring is legitimate and necessary.

Just saying.

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Safely Buying British

China not only has a taste for British cars; it likes its companies, too. The Economist reveals that China’s sovereign wealth fund has sprinkled a little of its largesse around a lot of Britain’s biggest companies. The State Administration of Foreign Exchange (SAFE), which manages the country’s foreign reserves, has put £13.8 billion (147 billion yuan/$22.3 billion) of its estimated at $350 billion investment fund into 63 of the companies that make up the FTSE 100 index.

Holdings vary in size from 0.18% in the Royal Bank of Scotland to 1.63% in ARM Holdings, a technology firm. (A full list of the fund’s disclosed holdings can be found here.)  Its biggest investment by value is in Royal Dutch Shell; energy and basic materials are the two sectors that attract most of its cash.

Where else in the West is it similarly sprinkling, we wonder?

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SAIC To Put An MG Saloon Back On Britain’s Roads, Drive Into Europe

It is scarcely the thunderous 1950’s police-car lookalike MGZB that Brits of a certain age will remember, but the MG6, seen above in a corporate promotional shot, is soon to go on sale in the U.K., the Wall Street Journal reports, returning a saloon from the storied British sports-car manufacturer to Britain’s roads for the first time in years. The marque is now owned by SAIC Motor, acquired via a tortuous route following MG’s descent into bankruptcy and SAIC’s own merger with NAC. SAIC’s home-market version of the MG6 has sold well in China; the 1.8-litre model of the hatchback going on sale in Europe will be tweaked to European tastes, as will a planned 1.9-litre turbo-diesel.

SAIC is also looking to break new ground for a Chinese carmaker in western Europe. Not only is it producing the car at Longbridge in Britain’s Midlands, it is setting up dealerships in the country, making it the first to have a distribution channel in Europe of its own, though it may also tap into the expertise of the global dealer network of its U.S. partner, GM, as it reportedly plans eventually to sell 40,000 MG6s a year in Europe.

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