Xi Jinping is in the UK for the first state visit to Britain by a Chinese head of state in 10 years. Hu Jintao, Xi’s predecessor, visited the country in 2005, when Tony Blair was prime minister.
This visit reciprocates several made by Conservative politicians to China. David Cameron led a trade mission to Asia’s biggest economy in 2013 and George Osborne was there just last month.
The Chinese government is targeting economic growth of 7% this year, the lowest in over two decades. This follows a crisis over the devaluation of China’s currency and was followed by a stock-market crash. But that did not seem to dent the UK chancellor’s enthusiasm for a deepening of Sino-British ties and Osborne has called the impact on other economies “relatively limited”.
Several infrastructure projects the government is pushing for rely on Chinese investment. The most notable is the new Hinckley Point nuclear power station, which Osborne talked about during his visit to China.
Chinese companies invested $5.1bn (£3.29bn) in the UK during 2014, according to Baker McKenzie and the Rhodium Group. This is more than they spent in any other major European economy. One of the more notable deals was the purchase of Pizza Express by private equity firm Hony Capital.
Between 2000 and 2014, Chinese investment in Britain totalled $16bn compared with $8.4bn in Germany, $8bn in France, $6.7bn in Portugal and $5.6bn in Italy.
The UK government also has ambitious targets when it comes to trade. Osborne envisions China as the UK’s second largest trading partner after the US by 2025.
More UK products are making their way to China than ever before, with 4.8% of British goods exported there in 2014, up from 1.3% in 2004.
However, this is still considerably behind the US (12.8%), Germany (10.6%) and the Netherlands (7.9%).
But while exports elsewhere have flatlined, those to China continue to grow.
UK imports from China have increased a lot faster than exports. Britain’s trade deficit with the Asian country in 2014 was £19.5m. When only looking at goods, that figure increases to £22.5m, which is second only in the world to Germany.
Part of the way to change that is to make Britain a place that it is easier for Chinese companies to trade with.
On his trade mission to China in 2013, David Cameron said that French and German language classes should be snubbed in favour of Mandarin. The number of pupils taking Chinese GCSE has begun to increase again after a drop off in 2012, which was largely due to many switching to the alternative ICGSE qualification.
Britain and China have also announced a plan that would lead to stocks on the Shanghai market being traded in London and vice versa.
Although the UK isn’t the most exposed of the G7’s main economies to a slowdown in China, a significant decline in Chinese imports could lead to a substantial loss for the British economy.
