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Sieren's China: In UK, tea with milk or simply green?

Two souls have found each other. China is seeking an alternative to Germany in Europe, while the UK is looking for a partner who can spruce up Britain's ramshackle infrastructure, DW's Frank Sieren writes.

When Queen Elizabeth II invites the Chinese president for a visit, she does it according to good English protocol: Prince William handed over the official letter on his trip to China in March. Xi Jinping's predecessor, Hu Jintao, had last visited Britain in 2005. The current president met the queen, Prime Minister David Cameron and opposition leader Jeremy Corbyn at an official banquet hosted by the government and the royal family at Buckingham Palace on Tuesday evening.

This was not attended by Prince Charles and his wife Camilla, both supporters of the Dalai Lama. Instead, they invited the president and his wife, Peng Liyuan, to Clarence House for tea. Charles was unable to break totally with English rules of hospitality.

Britain's roads, railways and electricity lines are in a poor state. An important element of China's recent foreign policy has been to develop infrastructure in remote countries. So far it has concentrated on emerging economies, but now it's turning its attention to Britain, too.

China is investing 16 billion euros (18 million euros) in a high-speed rail project that will connect London with the north by 2026. It is also building highways and contributing 2.65 billion euros to a nuclear power station in England. Moreover, China already owns 10 percent of Thames Water, Britain's biggest water utility, and is funding the expansion of airports in London and Manchester.

China and Britain are not only connected by infrastructure projects but also by growing trade relations, though Britain is a distant second when it comes to China's European trading partners. Whereas bilateral trade grew by 15.3 percent to more than 70 billion euros in 2014, the trade volume between Germany and China is well over 150 billion euros.

London trade hub for Chinese currency?

During this visit, leaders were working to develop a third aspect of Sino-Anglo trade: cooperation on the Chinese currency, the yuan. For about three years, Britain has been positioning itself to become the main European trading hub for the yuan as the currency gains in importance. In 2014, yuan trading volumes in London rose 143 percent compared with 2013. Global daily turnover reached $65 billion - six times more than in 2011. HSBC and Deutsche Bank predict that the yuan will be fully convertible by 2020. London recognized this early on and Britain was one of the first to label the yuan a reserve currency. Total deposits at the end of 2014 were 20 billion Chinese yuan, 37 percent more than in the previous year.

So, London is already well ahead of its competition and hoping to further capitalize on this. The governments in London and Beijing agree that, whether they drink tea with milk or green tea, what's important is that economic relations remain good. This is why the Lord Mayor of London traveled with a business delegation to China last month to look into further partnerships with Chinese companies on the finance and capital markets and to prepare the discussions with President Xi. The idea is to ensure that the yuan continues to play a stronger role as a currency in the International Monetary Fund.

Europe's first clearing bank for the currency opened in London, rather than Frankfurt or Switzerland. In March, Britain became the first Western country to become a member of the Asian Infrastructure Investment Bank, which Beijing initiated. China is grateful for Britain's efforts to help build up the yuan as a global currency; Britain is right on time. The positive geostrategic side effect is that Beijing is developing a second important partnership in Europe after Germany. Berlin should not underestimate this.

DW's Frank Sieren has lived in Beijing for 20 years.

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