Chinese money flows into UK

[Li Min/China Daily]

Chinese firms are now bidding for UK infrastructure contracts as a springboard to demonstrate their technical expertise

Chinese companies are increasingly investing in the United Kingdom's infrastructure sector, with the potential to invest 105 billion pounds ($170 billion) in the energy, property and transport sectors by 2025.

A report released in October by the UK law firm Pinsent Masons and the Centre for Economics and Business Research in London comes at a time when there is a yawning gap between the UK's current infrastructure needs and the UK government's planned investment.

The National Infrastructure Plan drawn up by the UK government identified close to 400 billion pounds of investments that need to be made through 2020, though the report identified real infrastructure needs to be closer to 500 billion pounds.

In the years following the outbreak of the global financial crisis, Chinese companies and sovereign wealth funds have invested in UK infrastructure projects as financial investors.

In 2012, China Investment Corp, the country's sovereign wealth fund, bought an 8.68 percent stake in Thames Water Utilities Ltd and a 10 percent stake in Heathrow Airport Holdings. In 2011, Cheung Kong Infrastructure Holdings purchased the UK utility company Northumbrian Water for 2.4 billion pounds.

But since then, Chinese companies have changed course and are now bidding for contracts to use the UK's infrastructure sector as a springboard to demonstrate their technical expertise and expand globally.

Opportunities

Nuclear energy, high-speed rail and commercial business parks are all important areas in which Chinese investors are seeking investment projects.

Two Chinese nuclear power companies have reached an agreement to invest in the UK's first nuclear power stations over the next two decades.

The two planned reactors are at Hinkley Point C in Somerset. Led by France's EDF Group, the pair of reactors will cost 14 billion pounds. China General Nuclear Power Group and China National Nuclear Corp are expected to have a combined 30 to 40 percent stake in the consortium, with Areva taking another 10 percent.

Another high profile project is the HS2, the UK's highspeed rail network plan that has attracted Chinese interest, although the bidding process for the project has yet to begin. The first phase of construction should last from 2017 to 2026. The first train services will run between London and Birmingham from 2026.

"As for nuclear power and high-speed railways, China's technology and experience are abundant. China can prove its strength in both fields by taking part in the UK projects," says Zhou Xiaoming, minister counselor with the economic and commercial office at the Chinese embassy in London.

"In such projects, China's expertise is building them quickly and maintaining quality."

In addition to energy and transport projects, many Chinese real estate and construction companies have invested heavily as both investors and contractors in greenfield and redevelopment projects in the UK.

Beijing Construction Engineering Group's 800 million pound investment in the Airport City Manchester project is one such high-profile project. The Chinese construction company will take on a 50-50 split of the project's construction with UK construction company Carillion.

Another is the Chinese developer Advanced Business Park's $1.51 billion project to transform 14 hectares of the historic Royal Albert Dock in London into an office complex over the next decade.

Alongside these large-scale infrastructure investments from China, many Chinese construction companies, project design companies and supply-chain related companies plan to grow into the UK.

These include China Building Technique Group Co, a construction company that is a subsidiary of the China Academy of Building Research Architectural Design Institute, known to champion innovative building methods.