What Does the China Presidential Visit Mean for UK Investors?

MARKET REACTION: Chinese President Xi Jinping is on a state visit to Britain. What are the aims of this trip and how will his policies affect private investors?

Emma Wall 22 October, 2015 | 11:00AM
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Emma Wall: Hello and welcome to the Morningstar Series 'Market Reaction'. I'm Emma Wall and I'm joined today by Catherine Yeung, Investment Director for Fidelity.

Hello, Catherine.

Catherine Yeung: Hi, Emma.

Wall: So the President of China is visiting the U.K. much publicized state visit. What's the aim of this visit?

Yeung: From both sides to forge better relationships and of course from an investment perspective to execute and announce a number of deals. The nuclear deal being one of the key deals that has recently been signed-off.

Wall: And how does this state visit tie in with, what the President's aim is for China?

Yeung: So the one belt, one road strategy. So that’s President Xi Jinping's strategy to basically recreate the Silk Road route, so maritime as well as rail, but it's more than that.

So it's a framework to see China become the demand center for not just industrial, but heavy industrial products or manufacturing, but in services. So lot of the deals that are being implemented or executed in the U.K. is really part of this overall strategy and this strategy really fits through into the President's ultimate aim of once again becoming the world superpower.

Wall: And of course this route doesn’t just affect Asia. This will run as you say the old Silk Route which will go through Central Asia, and through Europe connecting the North of Africa with China indeed. So they are far reaching implications for this.

Yeung: Yes, and even a few months ago, it was about May, Premier Li in fact endorsed or signed-off the deals in Latin America to create a train system from Brazil all the way to Peru. So it's beyond the tradition Silk Road it's all countries and in fact many countries can benefit too.

Wall: And so this is what we are thinking for the investors' point of view. This will be infrastructure, this will be anything that deals with import, export. Where are the investment opportunities created by this policy?

Yeung: So upfront it would be infrastructure related. But ultimately one belt, one road is China's way of exporting its excess capital and its capacity. So China ultimately is moving away from fixed asset investment spending internally. They still have a lot of engineers, they still have a lot of steel and they are trying now to export that.

So domestically we are moving to an environment or a growth model made up predominantly of services and consumption and then from an international perspective we are exporting a lot of this talent as well as as I said capacity and capital.

Wall: Catherine, thank you very much.

Yeung: Thanks, Emma.

Wall: This is Emma Wall from Morningstar. Thank you for watching.

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Emma Wall  is former Senior International Editor for Morningstar

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