We are now in the midst of a “golden age” in relations between the UK and China. That at least has been the prevailing narrative since late 2015, when President Xi Jinping of the People’s Republic visited the UK.
Since then, we have seen a more aggressively transactional, economics-based relationship prevail over the previous, more complex policy of “engagement”, which factored in heady ideas about trying to promote Western values and political change.
Key to this new era is the idea that, to a greater extent than any other developed economy, the UK is open to trade and investment from China.
The UK currently gets half of all the Chinese overseas direct investment coming to the European Union – yet China still accounts, at the moment, for less than 1 per cent of all foreign investment in the UK.
But as Brexit proceeds, there is the possibility that the dominant European investors in the UK will be slowly replaced by Chinese ones – a possibility seemingly being assiduously pursued by the current government.
If that story does unfold, then deals like the £1.4 billion purchase of Edinburgh based Skyscanner by the Chinese company CTRIP are only a sign of things to come.
For some, this kind of offloading of UK technology companies and expertise to a Chinese owner is cause for concern.
Skyscanner is regarded as cutting-edge in its arrangement of information, search engines and software. Surely this kind of proprietorial know-how should be kept in British hands, rather than being sold to a country infamous for its intellectual property violations?
Yet for others, this is precisely in this area where the UK needs to improve its attractiveness to investors – especially those from China. Especially if they want to come anywhere close to the level of investment needed to fill the potential gaps left post-Brexit by more mature, less high-growth economic partners.
In America and Australia, foreign investment boards scrutinise deals over a certain value, or those involving critical national infrastructure, and make a decision on whether they should go ahead.
Over the past decade, telecoms, energy and technology companies from China have all had proposed blocked, usually on security grounds.
In the UK, however, the attitude has been much more liberal. Huawei, China’s most famous hi-tech telecoms company, is able to operate in Britain in ways which would be impossible to imagine in the US or Australia.
The very fact that the British government has recently authorised Chinese investment in the Hinkley Point nuclear power plant, to be built in partnership with the French, shows that this instinct for liberalism continues.
Skyscanner is not part of Britain’s sensitive national infrastructure – but even if it were, the UK does not, in any case, have an investment protocol process like the US. So the grounds and means for even trying to prevent a sale like this were non-existent. Especially since as the company has secured commitments to continue employing its 500 people in Edinburgh, and to remain, in appearance and in focus, a British company.
The more important questions is whether this sort of deal offers any leverage for British travel or internet firms to get any real entry point into the vast and growing market of China.
Skycanner’s new owners, CTRIP, have a large part of the Chinese market. Working on collaborations in which Chinese clients use Skyscanner services outside of China, or Skyscanner customers use CTRIP in China, thus offers a powerful synergy.
This is a sector where foreign companies are unlikely to get very far without a good local partner, because of the depth of consumer knowledge needed. And might this kind of investment link lead, further along the line, to better co-operation on entry to each other’s markets?
The other question is whether this investment prefigures a diversification of China’s involvement in the UK.
At the moment, despite all the high expectations, the majority of Chinese money goes into real estate. After that, some goes into infrastructure, some into diversified equity investment, and some into technology and manufacturing.
Will we now see more leading British companies start to accept Chinese involvement, whether in terms of building up shareholdings or outright purchase?
For the Chinese investors, the question is a much simpler one.
They want to have decent returns on their investment (their record here has been patchy); they want to get experience running and working with foreign companies; and they want to strike the kind of deals which can act as an advert for their deeper engagement with foreign markets.
Skyscanner, therefore, is part of a larger story – and an increasingly important one. The only question is whether it will be a story that is told slowly, or fast.
