Once we had ping-pong diplomacy, now it is football-fuelled dealmaking. When Yaya Touré ambled into a small bar near Beijing’s Workers’ Stadium last week, little did he know he was the latest big name ambassador for the “northern powerhouse”. The Manchester City star offered a bemused smile as more than 50 Chinese fans rushed forward screaming his name, one holding aloft a scarf that declared: “I am a Cityzen.”
Touré’s guest appearance – 24 hours before City’s abandoned showcase derby match against Manchester United in the Chinese capital – was Manchester’s latest attempt to cash in on China’s record-breaking spending spree by appealing to its football-mad investors.
The prize? A share of the $100bn-plus in overseas deals done by Chinese firms in the first quarter of this year – more than they spent in all of 2015, itself a record. These follow President Xi Jinping’s “one belt, one road” policy, aiming to address a slowing economy, falling currency and saturated domestic market.
China’s cash-rich companies are looking increasingly outside London, with recent eye-catching deals ranging from a 60-year, billion-pound construction deal in Sheffield to the £45m takeover of Wolverhampton Wanderers by China’s answer to Warren Buffett, and a spate of Manchester property investments.
At an investment summit hosted by Manchester’s business leaders last Monday, ex-players Dwight Yorke, Sun Jihai and Mike Summerbee entertained a coterie of Chinese executives before the dealmaking got under way at a plush hotel near Beijing’s Bird’s Nest stadium.
Barbara Woodward, Britain’s ambassador to China, who was at the event, said: “Chinese investors are looking for very big projects. That billion into Sheffield is a very big project that can transform the city centre. There are lots of investors with a few million to spend, but in China there is a large-scale approach which is very suited to helping us regenerate, particularly the north of England.”
In her first interview since Britain’s vote to leave the European Union, Woodward insisted the outcome had not shaken investor confidence in the UK. “This is a month on now and we’ve been very clear with the Chinese that the core investing fundamentals – skilled workforce, low tax, rule of law – all apply still. The Chinese are all signalling to us that frankly, with the pound lower than it was, then we’re a pretty attractive investment destination.”
The ambassador also insists that the so-called golden era of British-Chinese relations – led by former chancellor George Osborne – was “not in trouble” despite the economic uncertainty, and experts predicting a cooling of the relationship under Theresa May. “I don’t think you should abandon the golden era at all – and the Chinese side too were very keen on that. No one is walking away from that,” she said.
It may be months before the deals negotiated last week in Beijing become public, but executives present insisted that Brexit had not put the brakes on inward investment. “I’ve been very reassured,” said Sir Howard Bernstein, Manchester city council’s chief executive, who led the delegation in Beijing and said there were three or four big investments under way.
A Manchester-based executive at property broker James Lang LaSalle, which advises clients on flagship London properties including the Grosvenor House hotel, said he was “very hopeful” that new Chinese-funded deals would be announced within the next three months.
Gary Neville, the ex-England footballer turned property magnate, last week became the latest to unveil plans part-funded by China that will transform Manchester city centre. His £200m project – which includes £15m from Chinese investors – will see the construction of two new skyscrapers, a five-star hotel and a split-level public plaza in place of an “underused and unwelcoming” block that will be torn down.
Britain’s decision to leave the EU, said Neville, had prompted him to fly out to Singapore to offer soothing words to his business partners. “There is a level of uncertainty – there’s even more uncertainty overseas … I suppose in some ways we had a decision to make: do we go or do we stop? Our duty as Mancunians is to go.”
Neville’s is just one Manchester project to benefit from Chinese funding following the state visit by Xi to London and Manchester last October. Flanked by David Cameron and Osborne, the Chinese president bestowed his blessing on the then-chancellor’s “northern powerhouse”, visited Manchester City’s football academy – taking a famous selfie with striker Sergio Agüero and Cameron – and announced the first direct flight from Manchester to mainland China.
Ken O’Toole, chief executive of Manchester airport, said the new Hainan Airlines service had so far filled more than 90% of seats and could smooth the way for further big-money investment deals in the north. The airport is understood to be edging closer to another new direct flight to China, this time to Shanghai.
“Prior to the existence of a direct flight, this money would have gone to London and the south-east but there is now clear recognition of the strength of Manchester and the north as an investment proposition, particularly in China,” he said.
Manchester’s estate agents have for some time been reporting heavy interest for the smartest residential projects from Chinese buyers. In some developments, they are reported to account for up to 25% of buyers, as they seek better value than they can get in London. But where President Xi goes, money follows. Less than two months after his visit, media tycoon Li Ruigang paid £265m to acquire a 13% stake in Manchester City’s parent company.
The Beijing Construction and Engineering Group (BCEG), which is backing the Gary Neville-fronted project and whose chairman was at the event hosted by Manchester’s business leaders last week, has also agreed to provide funding to kickstart a £650m development of apartments, office space and gardens at Middlewood Locks in Salford.
The Locks was one of 20 northern projects that together formed a “pitchbook” of investment opportunities, which Osborne took to Chengdu last year as part of a bid to raise up to £24bn to fund development in the northern powerhouse. A Treasury spokeswoman said discussions were ongoing with more than 15 different Chinese investors over projects highlighted in the pitchbook. BCEG is also an investor in Airport City, an £800m commercial district close to Manchester airport that includes a £130m “China cluster” – called Wuhan Square and Shenzhen Gardens – designed to attract Chinese firms setting up in the UK.
Last September, a group based in Xinjiang, Hualing Group, also agreed to invest £60m in Middlewood Locks, the Thorpe Park business zone in Leeds and a digital campus in Sheffield in a deal with the developer Scarborough Group.
But it is the 60-year, £1bn Sheffield deal with Sichuan Guodong Construction Group, announced earlier this month after 18 months of negotiations, that marks China’s biggest investment outside London to date.
The first tranche of the funding will see £220m spent on a handful of projects in Sheffield’s city centre, including the city’s first five-star hotel, together with residential blocks and student accommodation that according to the city council should create “hundreds if not thousands” of jobs in South Yorkshire. A board made up of council leaders and Sichuan Guodong executives will meet twice a year, to jointly decide which projects to approve.
Leigh Bramall, Sheffield city council’s deputy leader, said the prospect of connecting Leeds, Manchester, Sheffield and Liverpool within 30 minutes of each other – by much-needed upgrades to rail and road infrastructure – effectively made much of the north “one city, on a Chinese scale”.
While 30 minutes to connect the four cities may appear a distant dream, the Labour peer Lord Adonis said journey times between Manchester and Leeds should be reduced to 40 minutes – from between one and two hours currently – by 2022. In the March budget, Osborne unveiled plans for a high-speed line from Manchester to Leeds – HS3 – and an 18-mile underground road tunnel beneath the Peak District, with initial funding amounting to £300m. While the announcements were broadly welcomed, there has been criticism that HS3 ignores major cities like Liverpool and Sheffield.
Bramall said there remains an outdated view of the north among Britain’s London-centric investment community: “Some British investors have got a somewhat bucolic view of the north, or certainly have had historically,” he said. “The Chinese look at us with a fresh pair of eyes. They see the potential for big cities that have got great universities, with a fantastic quality of life, and they want to be part of the growth of those cities and make returns that way.”
There is, however, uncertainty about Britain’s relationship with China post-Brexit and post-Osborne – especially since the government’s decision not to simply rubber-stamp the Hinkley Point nuclear power project, which has substantial Chinese backing.
Steve Tsang, a professor of contemporary Chinese studies at Nottingham University, said May’s government would probably seek to cool Osborne’s “at any price” approach, which led to him being praised by Chinese state media for not emphasising human rights.
“I think Hammond and May will want to have the relationship on a more normal basis,” Tsang said. And that could be bad news for the northern powerhouse plans: “If they do I would expect the Chinese government to be less helpful on the economic side.
“It is the beginning of the end of the so-called golden relationship but I’m not saying it’s over – yet.”