China is the world’s largest in many league tables. Its digital market being second to none, as the home of some of the world’s leading technology companies, including Alibaba, Tencent, Huawei and Inspur.
Following President Xi Jinping’s state visit to the UK last year, marking the beginning of a “golden era” of Sino-UK relations. As China shifts focus to consumption and services, the UK ramps up innovation and exports. The two economies’ complementary growth marks a huge global opportunity, a relationship projected to peter out following the UK’s vote to leave the European Union.
A few weeks ago, Professor Kamel Mellahi of the Warwick Business School shared his thoughts on how the Brexit vote may affect Chinese investment into the UK. He asserted that Chinese investors may lose confidence in the UK because of the economic volatility following the Brexit vote, especially since many see the UK as a gateway to Europe.
For John Zai, founder of Europe’s first Chinese capital-backed international start-up ecosystem, Cocoon Networks, this couldn’t be further from reality.
Cocoon Networks launched a £500 million London-based venture capital fund aimed at investing in UK and European tech startups earlier this year. For Zai, the Brexit vote does nothing to fade UK’s investment appeal. “Cocoon Networks is committed to connecting equity investment and technology transfer between China and Europe, regardless of whether the UK is part of the EU or not. Although Brexit suggests short-term uncertainties in the UK, the country will still be an active power in directing the world’s technology and innovation,” he says. “We believe that the UK is not a gateway to Europe, but a holy land for cross-board technology business and investment.”
In many ways, Cocoon Networks is a venture capital firm, but with a focus on circulating innovations in the UK and Europe, and moving them towards China. According to Zai, the UK has caught the attention of what is currently the most influential technology forum in China- the Pujiang Innovation Forum (in Shanghai). For the first time in the event’s nine-year history, it held its pre-forum in London, highlighting the much-hyped ‘golden era’ of China-UK relations. “Personally, I feel the Pujiang Innovation Forum is a perfect example of the efforts we are making to bridge the collaboration of technology transfer and innovation between China and the UK, and it comes at a time when China and Britain continue to develop strong relations, with trade and investment between the two on the rise,” Zai explains.
More pressingly, Chinese investors are only now realising there’s a world outside Silicon Valley, according to Zai. “Chinese investors are used to focusing on tech startups in the US, due the global influence of Silicon Valley. But what Chinese investors have ignored is that the valuations of startups based in Europe are relatively lower than those in America, and the UK’s market bubble is much smaller than the US, which leads to Chinese investors beginning to change their focus from the US to the UK,” he tells GrowthBusiness. “It is also why we are here. Cocoon Networks aims to bridge equity investment and technology transfer between China and the UK.”
While China has an unparalleled capacity to invest in growth sectors, the relationship will not be one-sided, says Zai. “We are currently building a platform to nurture this two-way partnership. Going back to my example of the 2016 Pujiang Innovation Forum; it perfectly strengthens a two-way partnership by solidifying the communication and collaboration of technology transfer between China and the UK. More specifically, at the Forum, we announced that the Shanghai Technology Exchange and Shanghai Innovation Centre, which are government-backed leading technology transfer and innovation institutions in China, have assigned us to launch their London branches at our innovation centre,” says Zai.