The UK and China have an unparalleled financial partnership. China recognises that London is one of the most vibrant and important financial centres and an increasing number of Chinese financial institutions have set their European base in London. The Chinese yuan has been accepted as an IMF reserve currency and as China continues to develop its financial sector with the further internationalisation of the RMB and the boom in fintech, there will be more opportunities for the UK’s financial institutions both onshore and offshore.
CBBC’s Financial & Professional Services (FPS) sector can be broadly divided into two groupings: financial services and professional services. CBBC’s work in the financial and professional services sector covers banking, insurance, asset management, wealth management, legal, tax, accounting, fintech, recruitment and executive search. We organise flagship events and missions, publishing reports and offering an extensive partner and member company network.
Our team has helped more than 200 member companies to engage with opportunities across both corridors of Inward and Outbound investment. We are highly active as a leading voice in the UK China policy arena, engaging deeply with government through the UK-China Economic and Financial Dialogue (EFD), Joint Economic and Trade Commission (JETCO) China Market Advisory Group and advocating on market access and regulatory issues. We develop programmes working closely with our members and partners in the sector and have led the way in promoting thought leadership around RMB Internationalisation, opportunities in China’s Free Trade Zones, doing business in China, the Belt and Road initiative (BRI), Public Private Partner programmes, Green Finance and Fintech. Our missions and events including the China Outbound Conference, China and China Business Conference continue to unlock growth across both economies.
- China has been the world’s largest banking system by assets since 2016 with a total of GBP 30 trillion (RMB 252.4 trillion) in bank assets as of the end of 2017. However, foreign banks are still deemed niche players in China; accounting for less than 2% of China’s banking assets.
- The state led merger on 18th March 2018 of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC) has created a new body: The China Banking and Insurance Regulatory Commission (CBIRC). The formation of CBIRC was created with the intention of addressing China’s financial regulatory vacuum and to provide enhanced supervision of the financial market. The CBIRC will cede some authority to China’s central bank, the People’s Bank of China (PBOC), which will assume responsibility for drafting key regulations and prudential oversight in banking and insurance.
- China is home to the world’s second largest insurance market, which is growing at a rate of 20% year-on-year. It is predicted that a rise in the insurance market share held by foreign companies will take place by 2020 as the onshore insurance industry becomes more competitive. The insurance industry in China offers huge potential for growth, yet issues such as barriers to access for foreign investors and licensing restrictions inhibit opportunities for growth amongst foreign insurers and brokers. Despite these limitations, the outlook is positive: as a result of President Xi’s reforms that seek to create a “New Normal” growth agenda based on consumption-led demand and outbound investment, China’s insurance market will need to respond to match the requests of maturing businesses and more discerning middle-class urbanised consumers.
Capital Markets/Asset Management
- Despite a recent economic slowdown and high volatility, China displays robust long-term fundamentals to support a growing asset management market. By the end of March 2017, the size of the asset management market in China reached approximately GBP 6 trillion (RMB 53.47 trillion).
- The asset management industry is heavily regulated by China’s financial regulatory system, under which the People's Bank of China (PBOC) is responsible for monetary policies and regulations of the macro-financial market, and the Chinese Securities Regulatory Commission (CSRC) and the CBIRC take charge of different financial institutions and their respective businesses.
- Foreign financial institutions constitute a relatively small sector in China. A primary activity undertaken by foreign financial institutions is to provide onshore products and mandates of Chinese assets in RMB for local investors. A secondary activity is to provide access to global funds and products for investors with funds already offshore and in non-RMB currency.
The UK is a world leader in mature sectors such as banking, asset management, and the insurance market, as well as developing sectors such as FinTech and the international Renminbi (RMB) market. The UK’s strengths in the FPS sector are depicted by the following figures:
Banking: The UK has the third largest banking industry in the world with assets worth GBP 6 trillion in 2014; the market share held by UK firms of China’s banking sector is projected to stand at GBP 3.78 billion in 2020
Insurance: The UK has the third largest insurance industry in the world and the largest in Europe. UK insurers manage GBP 1.9 trillion in investments, equivalent to 25% of the UK’s total net worth
Asset Management: With assets of GBP 7.1 trillion under management, the UK is the second largest global centre for asset management. It is the leading European centre for the management of hedge funds, sovereign wealth funds, and private equity funds
FinTech: The UK has one of the world’s fastest growing FinTech industries. Investment increased by 136% in 2014, and 42% of all European FinTech investment is in the UK
RMB: London is the Western hub for RMB business. Recent figures from Thomson Reuters suggest over half of all offshore RMB trading takes place in the UK. According to the latest SWIFT data, the UK has overtaken Singapore as the largest centre for RMB clearing outside of Greater China
Legal Services and Dispute Resolution: three of the largest five law firms in the world based on headcount have their main base of operations in the UK, and 200 foreign law firms have offices in the UK. 24,000 commercial and civil disputes were resolved in the UK through arbitration, mediation, and adjudication in 2013. English common law is the most widely used legal system in the world, covering 27% of the world’s 320 legal jurisdictions.
China’s Belt and Road Initiative (BRI) will also generate significant business opportunities for foreign companies which obtain the desired expertise in the FPS sector, such as banking and insurance. The UK’s value proposition for the BRI is in the provision of specialist insurance products where Chinese or other local market insurers may not have expertise or capacity. Banks will also play a key role in financing infrastructures, as well as facilitating and advising cross-border investment.
Alongside the BRI, the Beijing-Tianjin-Hebei Strategy is another important national strategy for future reform and opening-up. The pilot and trial zone, “Xiong’an New Area”, is considered the end-result of the evolving results in the carrying forward of the Beijing-Tianjin-Hebei Strategy. UK Prime Minister, Theresa May, also expressed willingness to establish a Financial and Technology Zone in this area while visiting China, implying increased future opportunities for UK firms in the Financial and
Professional Services sector.