Jersey’s and Guernsey’s comprehensive global relationships mean they are well placed to be a conduit to China’s deepening connectivity with the rest of the world – but they must build their profile there, says Jinny Yan, Chief China Economist, ICBC Standard Bank
It might seem obvious, but China is an opportunity to capture today, and businesses that have not awoken to this could lose out. China is the second largest economy in the world, with nominal GDP of over $13trn – nearly five times the size of the UK or France (both $2.8trn, according to latest International Monetary Fund data).
Barriers to growth within a relatively domestically focused Chinese economy have been significantly lowered. China has become the largest consuming nation in the world, with its sights set firmly on the development of a consumer-based economy.
The growth of emerging markets is changing the global economic order. So, when asked about the potential for Jersey and Guernsey to benefit from this economic powerhouse, the response has to be: act now to find traction.
Offshore, mature financial centres such as Jersey and Guernsey can position themselves as partners to China, seeking to open up domestic markets. Nothing exemplifies this reach-out by China better than the Belt and Road Initiative (BRI), or New Silk Road. This means managing investment and wealth in a well-regulated and developed framework, abiding by international standards – the kind offered by the islands.
Formally launched in 2013, China’s BRI spans Asia, the Middle East and Europe and aims to accelerate economic development, in China and across individual countries, through mutually beneficial increased economic connectivity. That means upgrading infrastructure and boosting sustainable growth for all involved.
The BRI is evolving, drawing in partners from new regions and building connectivity with the rest of the world. BRI cooperation started with 65 countries, but has expanded to more than 150 countries and global organisations, including mature markets. Within this, there is a place for Jersey and Guernsey.
Already world renowned for their high-quality financial services, the islands have yet to find significant profile in China. This might just be about scale, but considering how highly they are considered as jurisdictions in areas such as wealth management, advisory services, trusts, and regulation and compliance, there is an opportunity in danger of being missed.
A key element is the relationships Jersey and Guernsey already enjoy with other countries. The BRI is all about China deepening connectivity with many of these economic partners. Recent additions include Italy and Switzerland, and a programme of huge investment by China into Africa means the islands could, and perhaps should, be looking to leverage the benefits of their relationships.
The islands have the capability to fill in gaps that exist in China’s early stages of financial and capital market development. Wealth management is relevant here – where domestic products are undergoing transformational reform in China, the islands have the regulatory, legal and institutional experiences to share, and the skill base to open up the potential of their neighbours to China.
Europe remains their biggest trading partner, with long-term investments still pouring into the UK (despite Brexit). It is here, perhaps, that the islands can be the service providers of choice for Chinese investors into the UK, Europe and beyond.
Proactive engagement
To start the process, Jersey’s and Guernsey’s profile must be raised in China. Achieving this largely depends on being aware of key cultural differences. Policy engagement should start with central government, supported by frequent local government-level dialogue. The work of the China-Britain Business Council and City of London is an effective model for how the islands can lift the profile of their financial services.
While work is already being done by Jersey and Guernsey to develop this relationship with China, too often local firms see China as the future; a key partner to be fostered through their next generational plan. But China is today’s opportunity. The British Virgin Islands are recognised by Chinese entities, and their profile will only grow until other offshore jurisdictions begin to notice China’s growth.
What is required is proactive engagement with China and an analysis of which financial services the Channel Islands can offer that are urgently needed today – what do they specialise in that will help China to achieve its own development priorities?
But unless the islands engage now, the potential of initiatives such as the BRI will be lost. China is growing its economic horizons. So could Jersey and Guernsey.