A sharp slowdown in Chinese growth will have a major impact on the global economy and, as the largest European investor in China and the largest destination in Europe for China’s outward investment, it is inevitable that the UK will also be affected. London stores and hotels have been gearing up to meet the expected boost to Chinese visitors. In the City of London, Chinese banks and financial firms have been expanding strongly and the UK government has been looking to boost the role of London in the internationalization of the Rembibi. Mainland Chinese buyers have been reported to be significant buyers of London Residential Property.
The news that Jaguar Land Rover sales in China fell 32% in the second quarter is an example of the impact likely to be faced by UK companies exposed to Chinese consumers. If Chinese Banks face a significant worsening of their problem loans, this might reduce their desire for expansion in London. Chinese investment into the UK, including through the buying up of residential property, could also slow significantly. This would hit a London property market which is already reeling under the effect of recent changes to Stamp Duty.
While it is difficult to forecast the magnitude of the effect of China’s slowdown on the UK, it could be significant especially if you believe as I do that the slowdown in China is going to be greater than currently anticipated.