Bentleys Woo China to London as Russians Pack for Home

By Matthew Campbell

Photographer: Jason Alden/Bloomberg

London’s Jack Barclay Bentley dealership has hosted British aristocrats, Russian industrialists and Arab sheiks in its 87-year history. Until this year, it had never held a Chinese New Year celebration.
In February, the dealership invited more than 200 wealthy Chinese expatriates from fields like finance and real estate to a Year of the Horse-themed event under the slogan “take the reins for a prosperous journey.” And, of course, Chinese-speaking staff were on hand, ready to rhapsodize about the pleasures of a car favored by the royal family and rap stars alike.
“A quintessentially English dealership could be quite intimidating” for Chinese buyers, said Chris Harris, marketing director for luxury automotive group HR Owen, which
owns Jack Barclay. “We wanted to de-mystify the experience.”
From luxury retailers to law firms to banks, Londoners are jockeying to take advantage of a wave of Chinese investment and tourism. With Russia, India and the Middle East struggling with weak commodity prices, businesses that cater to wealthy foreigners are betting Chinese money can make up the difference.
The property sector is seeing some of the most dramatic increase, with real-estate investment in the British capital from China tripling from 2012 to 2013 to about $2.8 billion, a figure that will probably be matched this year, according to broker Knight Frank.

$20 Million Yachts

Chinese-financed projects include One Nine Elms, a 56-story apartment tower on the south bank of the Thames backed by developer Dalian Wanda. And Shanghai-based Greenland Holding Group Co. this year said it would invest 1.2 billion pounds redeveloping a brewery in the city’s leafy south-west and building a residential tower near Canary Wharf.
Chinese buyers are also taking their first steps into corporate dealmaking in Britain. In July private equity firm Hony Capital Ltd. said it would buy U.K. restaurant chain Pizza Express for about $1.4 billion -- the largest-ever corporate takeover in Britain by a mainland Chinese company. The previous summer, Dalian Wanda (1068366D) agreed to pay $451 million for Sunseeker International Ltd., a London manufacturer of yachts that sell for as much as $20 million.
The increased presence is partly a function of China’s diversifying economy, said Nicola Mayo, a partner at law firm Linklaters who just returned to London after four years in Shanghai. “China Inc. is looking strategically at more sectors beyond natural resources.”
Some companies are using British deals to strengthen their position back home. Investment firm Sanpower Group this year took control of House of Fraser in a transaction valuing the Oxford Street department store at 450 million pounds; It’s now planning dozens of branches in China. Pizza Express expects to build new restaurants in the Mainland as interest in Italian-style fare picks up there.
Haibo Wang, a 38-year-old accountant from the coastal city of Dalian who moved to London a decade ago, can taste the change. A few years back, “the only food you could get was from Hong Kong,” he said. “Now, you can find every type of authentic Chinese food, from all the regions.”
Prime Minister David Cameron has made a concerted effort to strengthen ties with China amid criticism from business leaders that Britain has slipped behind the U.S., Canada and Australia in courting Beijing. Chinese Prime Minister Li Keqiang joined Queen Elizabeth for tea when he visited London in June, and Chancellor of the Exchequer George Osborne is promoting a plan to make London a hub for trading China’s yuan, for which the London Stock Exchange (LSE) in June inked a “strategic partnership” with Bank of China Ltd.

Orange Diamond

Two years ago, Boodles, a jeweler with five London stores, had no Chinese speakers on staff. Today it has two and is looking for a third as more than five percent of its business now comes from Chinese shoppers, up from one percent five years ago, says managing director Michael Wainwright. One Chinese customer who “we made a huge sale to last year wants an orange diamond,” Wainwright said. “You’re looking at a million pounds-plus. We know this person can spend this kind of money.”
Chinese shoppers have accounted for a quarter of retail purchases by overseas visitors in London this year, according to duty-free shopping provider Global Blue -- up from 14 percent in 2012.
The Chinese wave is arriving as London weans itself from a dependence on wealthy Russians, who provided steady work both to professional-services firms and the luxury sector. Amid European Union sanctions over Ukraine, President Vladimir Putin’s government has urged Russian companies to de-list from foreign stock exchanges and told billionaires to repatriate assets.

Passport-Free Travel

For instance, VTB Group -- a state-controlled bank that is a sanctions target -- cut more than a third of its European staff in the last quarter, with London bearing the brunt of the layoffs. The bank is also considering ditching its U.K. market listing.
Obstacles remain to a whole-hearted embrace of China in London. The U.K. government recently criticized China’s decision to block a delegation of British lawmakers from visiting Hong Kong as part of an inquiry into conditions in the former colony, which has been rocked by pro-democracy protests. And China’s breakneck economic growth is slowing to below 7 percent as a housing boom slows, which could curtail foreign investment and tourism in the U.K. and elsewhere.
More prosaically, Heathrow airport has trailed Frankfurt and Paris in developing new routes to China because of runway capacity limits. Britain has captured just 14 percent of the growth in flights from China to Europe over the last 20 years, with 34 percent going to Germany and 22 percent in France, figures from the Confederation of British Industry show.
And despite recent tweaks, Cameron’s government is facing calls from business leaders to loosen visa requirements for Chinese visitors. The U.K. isn’t a member of the passport-free Schengen area that includes most of western Europe, so Chinese travelers need separate visas for the British Isles and France or Italy. They often opt to avoid the hassle by only getting one for the continental countries.
“We think there should be more connectivity,” said Peter Bishop, deputy chief executive officer of the London Chamber of Commerce and Industry. The visa system, he said, “is weighted against people who want to do business in the U.K.”