TAIPEI (TheStreet) -- China is teasing the United Kingdom this week with offers of stronger trade and investment ties with the world's second largest economy because the British have paused political activity that offends Beijing.
More contracts for British companies in industries such as finance and infrastructure are expected to be signed to coincide with Chinese Premier Li Keqiang visit to the U.K. this week. Chinese banks may get cozier with London as the only non-Asian center for renminbi currency trade. This would be a change from the past two years when China has been upset with the U.K.
China's dissatisfaction with U.K. stems from when British Prime Minister David Cameron met in 2012 with the Dalai Lama, an enemy of Beijing, and his government called China a country of concern in its 2013-2014 human-rights report. But now Chinese leaders have signed new deals to help British companies, allowing them to rival French and German ones that have received more favor from Beijing.
"Before I came here, we used to say when we talked about Europe, it's Britain, France and Germany," China's ambassador to the United Kingdom, Liu Xiaoming, was quoted saying in Beijing's state-run China Daily newspaper. "But, unfortunately, many opportunities were missed in the past year or so, so now it has become Germany, France and Britain."
Relations cooled after Cameron met the Dalai Lama, a spiritual leader of the Tibetan government in exile and a man Beijing calls a separatist. China now owns Tibet.
Then last year Cameron visited China to "scout for investment to boost the cash-strapped British economy," China Daily said. That's flowery language for "begging."
"Britain is fighting for its share in areas where it has a discernible competitive advantage, and that is no different than other countries," says James Berkeley, managing director of the London-based management advisory service Ellice Consulting.
More than 40 deals worth about $30 billion are likely to be signed during Li's visit to Britain, Chinese media say. Benefits may go to British universities that depend on Chinese students, China hotel designer InterContinental Hotels Group (IHG) and financial-service companies such as Aon (AON).
Two-way trade reached $70 billion last year, largely on recent Chinese investments in the U.K.
London is also keen to build on its advantage as the only place outside Asia where Chinese yuan can be freely traded, a boost to banks with clients in China. That topic will probably come up during the premier's visit, China Daily says.
Even if the deals don't yield an instant bonanza, the visit carries weight with Beijing.
"Most current China-U.K. trade pronouncements are largely symbolic and a small handful is really meaningful and immediately useful," Berkeley says. "That is not wrong because symbolism is a highly important pre-cursor with Chinese officials."
At the time of publication, the author had no position in any of the stocks mentioned.
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