U.K. investment in China declines

Research by business and financial adviser Grant Thornton Friday has revealed that the U.K. has started lagging behind other nations in investment in China, Market Watch has reported.

Falling from its position as the second-largest international acquirer of Mainland Chinese companies by value in 2005, the U.K. has found itself at the eighth place in 2006 and at thirteenth place in the first half of this year, the report revealed.

While U.K. companies had spent over US$4.5 billion on 15 Chinese companies in 2005, this figure dropped largely to only US$19 million on seven companies in the first half of this year, ending Jun. 30. This is less than 1% of the total value of 2005, and less than the expenditure of Sweden, Finland and the Philippines on acquisitions in China for the first half of 2007.

However, Stephen Weatherseed, the head of Grant Thornton's China Group, said those U.K. companies that have made acquisitions in China are reaping "significant rewards," Market Watch reported.

This decline in U.K. investment appears to be part of a trend of slowing acquisitions in China by foreign groups, he said. In 2006, US$11.5 billion worth of Chinese companies were purchased, but this declined to US$1.9 billion in the first half of 2007. Additionally, there has been an apparent lack of large-scale financial sector and banking deals that were dominant in the past two years, the report noted.

David Brooks, the head of M&A at Grant Thornton Corporate Finance warned that if this trend of declined M&As continue to a large effect, the development of China's economy could be threatened.