Our round-up of media reactions to the Chinese Investment Corporation’s investment in one of our most famous utility companies
There were mixed reactions to the news that China’s sovereign wealth fund, the Chinese Investment Corporation (CIC), is to acquire an 8.7 per cent stake in Thames Water.
This being the first time the communist state has struck such a deal in the UK, it left some commentators a little nervy.
Writing in The Telegraph, business editor Damian Reece was quick to point out that the CIC’s investment was actually not that new.
“The Chinese have been buying stakes in blue chip companies throughout the financial crisis as share prices have been struggling,” he said. Pointing to the size of deal, Reece explained that it was this only that led to Friday’s headlines; until now China’s typical holdings have been “0.75pc-1pc so have remained below the disclosure radar screen.”
It’s not news that the UK is pretty much wide open to foreign investment. The various investment arms of Qatar’s sovereign wealth fund seem to buy or build a new British institution every week. Today on LondonlovesBusiness.com the CEO of the London Stock Exchange, Xavier Rolet, has whole-heartedly espoused the benefits of an international exchange.
But last year the hostile Kraft takeover of Cadbury dominated headlines, and the story continues to act as the poster boy for all that can go wrong in foreign investment of UK firms. Talking about the China/Thames Water deal on the Today Programme this morning, Lord Digby Jones was quick to reference the Kraft takeover. “America would never have let the takeover happen [were the situation reversed]” he said.
In reference to Pepsi Co’s attempt to take over French food company Danone, Jones said: “France has made yoghurt a question of national security.”
Labour’s shadow small business minister Toby Perkins believes the sale, and subsequent deals, must be managed sensitively. “We’ve got concerns, but we don’t want to get into protectionism. We need a right balance; we need London to be an open market for, and to continue to play, an important role as part of the global market,” he said.
For the BBC’s Robert Peston, the significance of the deal “should not be overstated”. Writing on his BBC blog, he said: “China is buying a small stake in a long established stable business, currently controlled by an Australian investment firm, Macquarie, rather than taking a risk on improving the fabric of the UK.
“The transaction will only turn out to be important if it is the priming of a financial pump that then gushes a flow of Chinese money into British roads, rail, hospitals and the other things that our indebted government is struggling to afford.”
For Lord Digby, however, it wasn’t that simple: “We need this investment,” he said. “But it’s set off alarm bells to say, ‘Unless you let us do it with you: enough is enough’.”
For Reece, it’s more a question of why China was investing rather than home-grown British companies: “It’s not that we’re short of cash. Companies and pension funds are sitting on billions but are either too nervous to invest in areas such as infrastructure, or the tax and legislative system dissuades them.”
Unsurprisingly, shadow minister Perkins blamed that nervousness on the government. “There’s a lack of confidence around generally… a lack of confidence in the government’s economic strategy and more broadly in Britain’s growth prospects,” he said.
Should Osborne be touting China for this sort of investment into the UK? Refusing to take a firm stance, Perkins said: “I think we need to look in more detail at precisely what the terms of the deal were, and what the alternatives were.”
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