Growing Optimism and a £2bn Payout: A Shot in the Arm for This British Giant

As the British Chamber of Commerce in China released its 2024-25 Sentiment Survey, it became clear that British businesses are entering a new phase in their engagement with China, marked by pragmatism and a growing optimism. This shift is driven by several factors, including increased revenues, market openness, regulatory changes, and improved market access. Additionally, the State Council of China's guidelines for attracting foreign investment have contributed to a more favorable environment for British companies operating in the country.

One of the most significant developments is the growing optimism among British businesses in China, with the proportion of companies reporting optimism rising by 15 percentage points, from 31% in 2022 to 46% in 2023. This increase mirrors the Chinese economy's gradual return to normalcy post-pandemic. The retail sector, in particular, reported the highest levels of optimism, with 75% of British businesses expressing high optimism. This aligns with recent data from China's National Bureau of Statistics, which showed record retail sales in China of 47 trillion yuan ($6.53 trillion) in 2023. This trend indicates that China's transition from an investment-driven to a consumption-driven economy is progressing, despite economic headwinds.

The State Council of China's guidelines for attracting foreign investment, unveiled in August 2023, have also contributed to the growing optimism among British businesses. These guidelines, focusing on a range of policies, including a level field for government procurement practices and R&D investment opportunities, were well received by British businesses. The energy sector, for example, saw a significant reduction in the number of businesses facing market access difficulties, with a decrease from 66% to 40% compared to the previous year, marking a notable 26 percentage point improvement. This improvement can be attributed to the State Council's guidelines, which aimed to create a more favorable environment for foreign companies.

Chinese industrial policy is also attracting high levels of R&D investment from British businesses, particularly in technology and healthcare sectors. One-quarter of healthcare companies told the chamber they were considering boosting R&D investment, indicating optimism in this sector. Additionally, 27% of British businesses reported seeing opportunities to reduce energy consumption and carbon emissions, aligning with China's goals to peak carbon emissions before 2030 and become carbon neutral by 2060. In fact, 70% of British energy companies were positive about China's dual carbon goals, suggesting plenty of room for foreign private engagement.

Renewed UK-China dialogue has also contributed to the growing optimism among British businesses. The Labour government's pragmatic approach, including re-engaging through the Economic and Financial Dialogue (EFD) and Joint Economic and Trade Committee (JETCO), has been well-received by business. Following recent high-level meetings between UK and Chinese leaders, businesses are hopeful for sustained dialogue to resolve market access issues and foster collaboration across multiple business sectors.

In conclusion, the growing optimism among British businesses in China is driven by a combination of increased revenues, market openness, regulatory changes, and improved market access. The State Council of China's guidelines for attracting foreign investment, Chinese industrial policy, and renewed UK-China dialogue have all contributed to this positive sentiment. As British businesses continue to navigate the challenges and opportunities presented by the Chinese market, they can look forward to a more favorable environment for growth and expansion.