World Economy

UK Throws Lavish Welcome for Xi

UK Throws Lavish Welcome for Xi UK Throws Lavish Welcome for Xi

News of China's economic cool down hit global stock markets on Monday, ahead Chinese President Xi Jinping’s state visit to United Kingdom.

China's statistics agency has said that the economy slowed down in the third quarter of the year, posting 6.9% growth. However, domestic retail sales witnessed a steady rise, subduing a sharp economic downturn, Deutsche Welle reported.

The world's second-largest economy reported on Monday its weakest quarterly growth since the 2008 global financial crisis, although consumer spending was stronger than projections.

China's economy grew by 6.9% in 2015's third quarter - July to September - marking its slowest growth since the first quarter of 2009, when the economy expanded by 6.2%.

"Continued downward pressures from real estate and exports caused gross domestic product growth to drop to 6.9%," said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

"But robust consumption and infrastructure prevented a sharper slowdown," Kuijs noted.

Lacking Momentum?

However, growth was above median projections from economists and still in line with Beijing's "around 7%" annual target.

"In order to restructure, the economy will face some downward pressure," said spokesman for China's official National Bureau of Statistics Sheng Laiyun in a statement.

"China does not lack growth momentum…Despite a slowdown in the industrial sector, China's services sector is growing rapidly," Laiyun added.

Consumer Spending on the Rise

While indicators showed deceleration in industrial production, which grew only 5.7% in September, retail sales - a strong indicator of consumer spending - displayed a steady rise in China's services sector with 10.9% growth in September.

With e-commerce, restaurants and other service-oriented platforms for domestic consumption employing 41.7% of the labor force, steady growth in the sector helped prop up the economy in the third quarter as manufacturing slumped.

"The data would suggest that retail sales is holding up the data and there are other areas that the government is factoring in consumption and services data that are not picked up in the monthly figures," said Oliver Barron, a policy researcher at Beijing's NSBO, according to Reuters news agency.

UK Throws Lavish Welcome for Xi

Meanwhile, the UK is rolling out the red carpet for Xi Jinping’s state visit starting Monday. Amid the pomp of a 41-gun salute, lunch with Queen Elizabeth II and lodging at Buckingham Palace, Prime Minister David Cameron will be looking to Xi to open up the purse strings and dole out billions of pounds of new investment, Bloomberg reported.

China opening the investment spigot would help redress a lopsided trade relationship that’s left the UK lagging its continental peers in winning Chinese largess. Chinese officials have said the amount of deals Xi will announce during the trip will be “huge.”

The UK is back in China’s good graces after Cameron’s May 2012 meeting with the Dalai Lama plunged the two countries into a near two-year diplomatic freeze. Chancellor of the Exchequer George Osborne reflected the UK’s more accommodative tone on a September trip to China when he signaled the UK would refrain from criticism on human rights and not engage in “megaphone diplomacy.” The UK, the first major Western country to get behind China’s Asian Infrastructure Investment Bank, was striving to be China’s “best partner in the West” and usher in a “golden era” between the countries, he said.

While the UK is now China’s second biggest European Union trading partner after Germany, it has the biggest trade imbalance of the five largest EU economies. That trade deficit reflects its relatively weak exports of goods and services compared with imports from China. The UK is counting on Xi making progress in his drive to transform China’s economy from an export-driven model to a consumption-driven one to create new markets for British firms.

China’s Silk Road–an ambitious plan to revive historic trade routes through a string of infrastructure projects linking China with Europe via land and sea--is another opportunity for British companies. To show how seriously the UK takes getting a piece of the “One-Belt, One-Road” action, Osborne became the first British minister to visit the northwestern province of Xinjiang, despite protests from human rights organizations which report widespread repression of Uighurs, a Muslim minority. Many of the overland routes will pass through Xinjiang.

Cameron is keen for Chinese companies to invest in Britain, and China has signaled it’s willing to do so. In an interview with China’s state-run CCTV he described the diplomatic relationship between the two countries as being in “a very special moment” and added it created an opportunity for “Chinese investment into United Kingdom, that is absolutely both beneficial for Britain and China.” Zhang Ji, assistant minister of commerce, said this month China and the UK will sign investment deals that will be larger than during any previous visit by a Chinese leader. Industries that will benefit include finance, real estate, energy, autos and technology, he said. During his trip Xi will visit Huawei Technologies Co., China’s largest maker of telecommunications equipment including smart phones. Huawei, which was banned in the U.S. over security concerns, supplies network equipment in the UK

In a warm-up for Xi’s visit, Osborne announced during his trip that the UK government will provide a guarantee of 2 billion pounds ($3.1 billion) for the construction of the UK’s first new nuclear power plant in three decades to be built in Somerset. China General Nuclear Power Corp. and China National Nuclear Corp. are poised to take stakes in the project being led by Electricite de France SA. The deal could also lead to China designing and building a second nuclear plant in Essex as part of the Cameron government’s effort for China to play a leading role in developing nuclear energy in the UK

China’s quest to internationalize its currency also stands to get a boost: Osborne in September also called for linking the UK and Shanghai stock markets and the issuance of yuan-denominated bonds in the UK