U.K. Offers London as Base for China's $200 Bln Fund

U.K. Offers London as Base for China's $200 Bln Fund

Jan. 18 (Bloomberg) -- U.K. Prime Minister Gordon Brown has offered London as an overseas base for China's $200 billion sovereign wealth fund, aiming to encourage the world's fastest- growing major economy to invest in Britain.

``Amidst the global economy's difficulties and turbulence, the importance of China and our growing relationship is absolutely crucial to the success of the global economy,'' Brown said today in Beijing. ``We want Britain to be the number one destination for Chinese business as it chooses to invest in the rest of the world. Tens of thousands of jobs in Britain can be created from cooperation between our two countries.''

The economy of the world's most populous nation overtook the U.K. in 2005, and Britain's trade with China may grow 50 percent to $60 billion by 2010, according to a goal set today by Brown and Chinese Premier Wen Jiabao. China last year surpassed the U.K. as the biggest exporter to the Eurozone and Brown wants to sell British luxury brands to Chinese consumers, attract Chinese students to U.K. universities and draw the country's estimated 300 million soccer fans to the English Premier League.

``We can now sell China not just financial services, but also a whole range of British brands that are becoming very popular among the rising number of Chinese consumers,'' Brown said at a press conference during his first China trip as British prime minister.

China may surpass the U.K. as the second largest market for Rolls-Royce luxury cars, the brand's owner Bayerische Motoren Werke AG said in April 2007. Rolls-Royce sold 75 cars in China in 2006, half of the brand's Asia-Pacific sales and about 10 percent of global sales.

China's Sovereign Fund

China Investment Corp. was set up last year to improve the returns on the Chinese government's $1.4 trillion of foreign- currency reserves. Beijing-based CIC spent more than $8 billion last year buying stakes in Morgan Stanley, the second-biggest U.S. securities firm, and Blackstone Group LP, manager of the world's largest buyout fund.

Sovereign wealth funds, which invest money controlled by national governments, have taken stakes in banks including Citigroup Inc. and Merrill Lynch & Co. in recent weeks. China Development Bank has invested in Barclays Plc, Britain's third biggest bank.

``We welcome international investors, but they have to play by our rules,'' Jon Cunliffe, a senior economic adviser to Brown, told journalists before he and the prime minister left London. ``We're in favor of open investment, an open economy.''

Brown, whose departure yesterday was delayed by a crash- landing of another aircraft at London's Heathrow airport, met Wen this morning in central Beijing.

Contracts Signed

The two nations signed eight agreements to cooperate in education, climate change and renewable energy. BP Plc and China Petrochemical Corp. agreed to expand a factory in southwestern China to produce acetic acid. HSBC Holdings Plc and Arup agreed to help Shanghai Industrial Holdings Corp. develop methods for financing the development of energy-sustainable cities.

The two premiers agreed to allow Chinese companies to double their initial public offers on the London Stock Exchange in the next two years. Up to 15 Chinese companies currently trade their stocks on the London exchange, according to Bloomberg data.

Virgin Group Ltd. founder Richard Branson, currently seeking financing for his offer to buy Northern Rock Plc, traveled with Brown. Branson said he's confident his bid would succeed, adding he didn't plan to talk with Chinese officials about the matter.

``I'm confident that the Bank of England can put a proposition together that can save Northern Rock,'' Branson said yesterday on board his flight to Beijing. ``We are the only serious contenders. The management indicated they agree. The board have indicated they agree. Subject to what Goldman Sachs have to say, I am still confident a deal can be done.''

Options Open

Brown has repeatedly said he is keeping all options open to recover more than 25 billion pounds ($49 billion) in government loans supporting Northern Rock, including nationalizing the bank. The government would consider allowing a bid for the bank financed by a sovereign wealth fund, Michael Ellam, a spokesman for the prime minister, said on Jan. 10.

To bolster his economic message, Brown has brought along 30 chief executives from the U.K. including Philip Yea of 3i Group Plc, AstraZeneca Plc's David Brennan and Arun Sarin of Vodafone Plc. Barclays Plc Chairman Marcus Agius, Standard Life Plc Chairman Gerry Grimstone and British Energy Group Plc Chairman Adrian Montague are also on the trip.

BLOOMBERG