British companies' exposure to the Chinese economy

During these current times of change and uncertainty, British companies are being exposed to new corporate risks arising from the Covid-19 pandemic, policy shifts and a deteriorating business climate.  China presents British companies with both opportunities and challenges for their business development and growth. According to the DIT, China was the UK’s 3rd largest trading partner in the four quarters to the end of 2021Q2, amounting to £93 billion (7.6% of UK’s total trade) and the stock of foreign direct investment (FDI) from the UK in China was £11 billion in 2019 (0.7% of UK’s total).  The success of UK firms in China will therefore depend on a sound understanding of the specific risks that the Chinese market poses for their investments, supply chains and customer demand.

Introduction

Dr Palitha Konara (Sussex) and Professor Yingqi Wei (Leeds) are leading a 3-month investigation into the exposure of British companies to the Chinese economy. The project aims to evaluate British companies’ investments, supply chain and customer portfolio exposure to China. The researchers will also survey the opinions of British companies to understand their future intentions/expectations related to their exposure to China.

In the context of the major political and economic changes of recent years, e.g., Brexit, the US-China trade war, and the pandemic, the team hopes that the project to be of practical use in building the resilience of British firms exposed to the Chinese market through trade and investment.

Research approach

Analysing primary and secondary data:

• UK-China trade and investment data from academic publications as well as UK, Chinese and international statistical organisations in the context of national, regional and global policy changes where existing research mainly focusses on China and the US
• British-owned subsidiaries in China to gain understanding of UK exposure to the Chinese economy at the sector and business level
• UK firms’ suppliers and customers in China to gain fuller understanding of UK-China supply chain risks
• The subjective opinions of British company managers in China to complement quantitative research with understanding of intentions and future trends in a national, regional and global economic policy context

Outreach and Impact

Direct beneficiaries of the research will include UK Government Foreign, Commonwealth and Development Office (FCDO) and Department for International Trade (DIT) civil servants working on China-UK trade, as well as UK businesses operating in the Chinese market. It is hoped that greater understanding of the data will enable better UK policymaking and business planning in China and the Asia-Pacific region.

Further Information

The project is funded by the FCDO. The research team brings together Fellows of the UK Trade Policy Observatory (UKTPO) at the University of Sussex alongside researchers at the University of Leeds. The former group includes the project lead Dr Palitha Konara, Dr Yohannes Ayele and Guillermo Larbalestier while the latter group consists of Professor Yingqi Wei, Dr Giles Blackburne and Dr Han Jin.