Stock Connect

China’s sovereign wealth fund and China Life on track to open offices in London

China’s five largest banks all have operations in the UK capital city, while Bank of China has a staff roster of more than 500

PUBLISHED : Tuesday, 15 November, 2016, 5:24pm
UPDATED : Tuesday, 15 November, 2016, 10:59pm

China Life and China Investment Corporation are among the latest mainland financial companies set to open offices in London, even as concerns over Brexit remain, according to Mark Boleat, chairman of the Policy and Resources Committee for the City of London.

“There will be more Chinese financial firms opening offices in London. The major mainland banks have expanded in London in recent years and they have sent more senior executives to London,” Boleat said in an interview with the South China Morning Post at Guildhall office in London.

He added that China’s five largest banks all have operations in London, while Bank of China has a staff roster of more than 500.

“Brexit may see London lose some business but that is not the case for Chinese banks, asset management companies and insurance firms which are keen to develop in the international financial centre,” he said.

Among the newcomers, China Life, the nation’s largest life insurer, will open a representative office in London by the end of this year, representing its first outside Asia, he said.

China Life paid US$1.35 billion in 2014 to acquire 70 per cent of an office tower on 10 Upper Bank Street in London’s eastern business district from Canary Wharf Group. Last year, the insurer acquired 40 per cent of 99 Bishopsgate, a premium office building in London.

China Investment Corp, the mainland’s sovereign wealth fund, will also set up office in London, Boleat said.

Shanghai Clearing House China Foreign Exchange Trade System will also open a representative office in London. Boleat said the closer ties should help London in its efforts to become a major offshore yuan trading centre. London is now the second largest off-shore yuan trading centre, trailing Hong Kong.

Boleat said the expansion by the Chinese banking and insurance entities reflects efforts by British and Chinese governments to forge closer ties.

British Chancellor of the Exchequer Philip Hammond last week said there would be detailed negotiation of how to establish a stock connect plan to provide direct trading links between exchanges in London and Shanghai.

“London-Shanghai Stock Connect is the first of its kind and it will further strengthen the financial ties between China and Britain,” Hammond said.

As China’s financial markets become more open and its firms expand overseas in support of their customers, it is vital that our respective financial institutions collaborate more closely
Douglas Flint, HSBC chairman

“It will bring mutual benefits. For the UK, the initiative will help to cement London’s position as the leading financial centre and open up new sources of investment. The initiative also marks an important milestone for China as it continues to open up its markets and liberalise its economy,” Hammond said.

HSBC chairman Douglas Flint will co-chair a newly set up UK-China Financial Services Industry Summit formed by senior leaders from both the British and mainland financial services sectors to recommend a long-term strategic plan for financial services cooperation of the two countries.

“As China’s financial markets become more open and its firms expand overseas in support of their customers, it is vital that our respective financial institutions collaborate more closely, “ Flint said in a statement.

Boleat said Britain would like to secure greater access to Chinese markets for British banks and fund companies.

The expansion of Chinese companies in London is in marked contrast to other foreign banks since a nationwide vote in June to leave the European Union. If Britain proceeds to exit the European Union, new restrictions will apply to London-based firms selling financial products or seeking to carry out transaction with entities in the single market.

Boleat said he has talked to mainland bank executives in London and believes they have no plan to retreat from London. European offices of Chinese banks will report to their headquarters in Beijing, which will allow London to run as a single market for these lenders.

“There will be many challenges ahead for London. Brexit is going to create a lot of uncertainties and some companies may slow down their investment and expansion plans in London. The falling value of the pound may draw more tourists, but it would also add in import price and inflation,” Boleat said. “But overall, London remains an attractive financial centre.”