China’s overcapacity, global expansion present ‘opportunity’ for British firms

British firms in China are less worried than their Western peers about excess capacity from the Asian manufacturing giant, instead seeing space for partnership as Chinese companies venture overseas, said a business advocacy group on Wednesday.

“There might be an opportunity for the UK to carve out a path that is a little different to other countries and regions in the world we’ve seen with overcapacity,” said Julian Fisher, chair of the British Chamber of Commerce in China, at a press conference for the release of the chamber’s sixth annual position paper.

In recent months, multiple countries have escalated their responses to a surfeit of Chinese imports in the new energy sector, which they claim has distorted their markets and disrupted domestic manufacturing.

Last week, the United States announced steep tariff increases on an array of Chinese imports, including electric vehicles (EVs), lithium-ion batteries and solar panels.

In October, the European Union launched anti-subsidy investigations into Chinese EVs to determine whether to impose punitive tariffs.

But unlike the US and EU, the UK is no longer an industrial powerhouse, creating complementarity between Chinese and British businesses, Fisher said.

“We are a service-led economy, and I think that might be an area where there are mutual benefits,” he said. “As Chinese businesses start to go global, they need the support of British insurance companies and law firms on market entry, and accounting firms.”

The business environment has improved for British companies in China over the past year despite a “generally pessimistic” outlook, the chamber said in the position paper.

Amid “mixed signals” from the Chinese government, the chamber said British firms believe Beijing needs to take more action on long-standing market access issues and implement “meaningful” regulatory reforms to boost confidence.

“For British businesses, who have long championed open global trade with China, the current ambiguity is frustrating,” Fisher said.

“Despite this, we recognise the remarkable progress in areas such as intellectual property rights and legal support for international businesses,” he said.

“China today is a far more positive place to do business than it was in the recent past.”

Engagement between the Chinese government and British businesses has reached “unprecedented levels” over the past year, according to the position paper.

“China is evidently charting a new course in its relationship with businesses, but clarity regarding the role of businesses is essential,” Fisher said.

China unveiled two separate 24-point plans – one in August and another in March – to reinstate the faith of overseas capital after foreign investment fell to record lows last year.

Actions enumerated in the plans include expanding the number and scope of sectors in which foreign businesses can invest, smoothing the process of cross-border data flows, strengthening intellectual property protections and loosening visa rules.

British firms have welcomed these tangible steps, the chamber said, but a total restoration of confidence has yet to occur. Investment into the Chinese market, it added, has been stymied by several instances of restrictive policies emerging without warning.

“Now, [the firms] call for similar decisive actions across the business landscape, firmly translating policy proposals into tangible outcomes for international businesses,” the paper read.

Improving communication and transparency from the Chinese government will be essential, the chamber said, particularly in the “new quality productive forces” which will drive future growth.

That expression – first uttered by President Xi Jinping in September and generally understood to describe the country’s emerging, technologically driven industries – has seen more frequent mention in recent months by Chinese officials and state media.

However, the chamber added, a complex geopolitical environment has put off British businesses from making new investments in several areas.

Despite a comparatively muted stance from British firms on overcapacity, more dialogue with the Chinese government is needed to address the issue, said the chamber, as concerns around profit margins and potential for increased trade barriers have stopped British businesses from reaching their full potential in supporting China’s green transition.