China: Challenges and opportunities for UK business

FCO Minister Hugo Swire spoke at the China Association Autumn Lunch about opportunities China presents for British business and UK growth.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Hugo Swire

Foreign Office Minister Hugo Swire said:

It is a great privilege to be invited to speak at the China Association Autumn Lunch. I would like to thank Hugh Davies and the China Association for organising this event, and for their part in strengthening the bonds between China and the United Kingdom. This week, I have seen firsthand some of our impressive cultural links, when I launched a spectacular exhibition at the V&A of “Masterpieces of Chinese Painting” which is well worth a visit. And later today I will be attending a dinner with potential Chinese investors, so there is no doubt in my mind of the importance of the relationship.

The very fact that there were two simultaneous high profile visits last week shows just what a powerful engine for growth and prosperity China is in the global economy. They also highlight that by working together, we can not only create thousands of jobs in both of our countries but strengthen understanding, deepen our friendship, and improve the lives of all our citizens.

So today I want to focus on the opportunities that soaring consumption in China presents, both for British business and our own growth, here at home.

China is changing rapidly and our policies and priorities need to reflect that. We cannot afford to think of China’s population centres simply in terms of Shanghai and Beijing. Already China has six cities that are larger than London or New York. More will follow. Between now and 2030, China’s urban population will grow by 350 million, more than the entire population of the United States.

In twenty years time, more than one billion people, 65% of the Chinese population will live in cities. By 2050 this could increase to 75% compared to just 50% today. And these waves of new migrants descending on its second and third tier cities will transform the landscape – as well as peoples’ lives.

As a direct result of these seismic shifts, it will come as no surprise that the Chinese economy is rebalancing. Growth is likely to average 7.5% this year. Demand for products and services like healthcare, education, the creative industries and luxury goods - all areas where Britain holds a strong international reputation – will continue to grow as urbanisation continues. And the British government is committed to doing everything it can to give our firms a competitive edge, working closely with organisations like the China-Britain Business Council.

We share the Chinese view that the best way to recover from a global financial crisis is not to pull up the drawbridge, as many countries were doing, but to increase cooperation and create sustainable – and mutually beneficial - growth through trade.

As Chinese firms continue to go global, they need expertise in the sectors we thrive in – from life sciences, high tech manufacturing and low carbon technologies, to world-leading education, creative industries, and professional services, these sectors all hold important commercial opportunities.

But the challenge in China, as elsewhere, is to get the hundreds of thousands British business who do not currently export, trading.

That is why the Trade Minister, Lord Green has pledged to help 50,000 small and medium sized businesses start exporting each year.

And that is why the Business Secretary Vince Cable announced only last week that more than seven thousand small businesses are to benefit from our ‘Grow Online, Expand Worldwide’ scheme- to help give them an effective web presence and get them trading.

That is why we are taking a proactive approach to supporting UK companies that are willing to move to the export market, especially small and medium sized enterprises. The “Passport to Export” service provides those considering trading overseas with the foundations they need to succeed: training, planning and ongoing support; including access to an International Trade Advisor.

And, that is why we have placed prosperity at the heart of the FCO, revived commercial diplomacy and reopened diplomatic posts across the world.

No-where has this shift in the FCO’s operation been more pronounced than in China. Just as we are urging businesses to go out into the provinces and second cities – the Foreign and Commonwealth Office is leading the way. Building relations. Extending our reach. Matching priorities with capacity on the ground and deploying more than sixty additional staff to the frontline to support British businesses in areas which, although may not be as well known to us, boast larger GDPs and populations than entire European countries. We are also planning to open a new Consulate-General to boost our reach and impact in central China.

We are giving British companies direct access to our expertise, using secondments to help businesses understand the workings of government, but also, vitally, to ensure that our diplomats have practical experience of business and the world outside Whitehall. Our ambassador in Beijing, Sebastian Wood, spent a year with Rolls Royce, a business with 2,000 employees in China, as well of course, more than 21,000 staff in the UK.

We are further developing the FCO’s pool of knowledge by reopening our language school and are committed to increasing the number of Mandarin speakers by 40% to ensure that language is not a barrier to trade and positive relations.

As a result, British exports are on the rise. Earlier this year worldwide exports of British goods to China hit £1bn a month for the first time ever. We are well on our way to meeting the ambitious target the Prime Minister set in 2010 of doubling UK trade with China to $100 billion by 2015. And with latest bi-lateral trade levels valued at almost $75billion, we could even exceed our goal - particularly if we look beyond China’s megacities.

Still, trade is a two way partnership, and the Government is equally committed to maintaining Britain’s position as the global destination of choice for business.

According to Chinese figures, investment into the UK is up 95 percent year-on-year, with the UK becoming the most popular European destination for Chinese investment in 2012. 2013 has been marked by a number of multi billion pound deals, from the redevelopment of London’s Royal Albert Docks to investment in the South Bank. Huawei have just last week announced they are building a new £125m UK research base, creating up to 300 jobs.

And, following the agreement of our memorandum of understanding in May, Chinese firms are looking for opportunities to invest in joint infrastructure projects, such as the Beijing Construction Engineering Group’s involvement in the redevelopment of Manchester Airport.

And only this week we have seen two Chinese nuclear energy providers join the consortium to fund the construction of the new Hinkley C nuclear power station, the first new nuclear plant to be built in almost 20 years.

So, there can be no doubt that Britain is open for business. And to underline that point it was also announced last week that we will streamline and simplify the visa process for Chinese nationals who want to visit the UK- whether for businesses, study or pleasure. Plans to expand our VIP mobile visa service, open a 24 hour visa service and, where possible, streamline the UK and Schengen visas application process will attract the brightest and best to work and study in the UK, as well as increase the number of Chinese tourists.

In 2012, 210,000 visas were issued to visiting Chinese nationals who went on to contribute around £300 million to the British economy. By 2017 we expect the number of visa applications received from Chinese nationals to increase five-fold, and reach more than 1million. These changes will significantly improve the ease with which Chinese nationals can visit the UK, and importantly, do business.

And when it comes to doing business, the more we can do to smooth the process the better. It is why I am very pleased that both British Airways and China Southern Airlines now fly direct from Heathrow to Chinese regions.

But, we know that the business environment in China is not always an easy one to navigate.

This is why for example, the FCO and UK Intellectual Property Office are funding a series of judicial exchanges on priority areas to improve the business environment in China. There is also a specialist Intellectual Property Attaché based in the British Embassy in Beijing

These exchanges are an important way of developing China’s rule of law – and a robust, fair and level playing field - which is essential for China’s long-term prosperity and stability. Business thrives in a stable, secure and corruption-free environment that limits the risk of shock, provides certainty of dispute resolution and offers protection of their capital and intellectual assets.

And that the case whether the business is offline or online, so we are also talking to the Chinese about cooperation on cyber crime and the protection of intellectual property in cyber space. After all, an open, connected but secure internet is critical to global prosperity.

Britain leads the way on free and secure investments. Lou Jiwei, China’s Minister for Finance, called the UK one of the most open economies in the world; a position bolstered by our sound legal system. And I am not going to disagree with him! But there is a wealth of expertise that the UK can offer China in this field.

And, just as the business environment is important, so too is the natural environment.

As cities in China and here at home continue to grow, they will need to become smart. They will need to be green, responsive, sustainable and networked. Capable of providing social, environmental and economic advantages. UK companies are among the world experts in urban planning, architecture and infrastructure development - and are well placed to assist China as it designs its cities. Our expertise in this area are exemplified by the decision, only last week, to commission Thomas Heatherwick – who previous designs include the new routemaster bus, the cauldron for the 2012 Olympic games and the British pavilion for the 2010 World Expo in Shanghai – to design two new metro stations in Beijing. The contract for a further 20 stations has still to be awarded.

Innovations such the congestion charge zone, the Barclays Bike hire scheme and real-time bus arrival times available through mobile apps have revolutionised the way in which Londoners travel. While the Royal Parks – which I know the Governor of Guangdong province has visited – dramatically improve quality of life and help to make London the greenest, as well as the greatest, city in the world.

Both our nation’s perspectives of the world are changing: we are both becoming more outward looking, more global. China’s success in the next few decades, if current trends continue, will be exceptional. But pairing her cutting-edge expertise in medicine, computing and technology with the UK’s unrivalled talent in fields from education and life sciences to financial services and beyond could make that growth phenomenal - and its why prosperity is a critical component of our relationship with China.

As the Chief Executive of Rolls-Royce noted at the Shanghai Motor Show earlier this year: “The Chinese are in love with Rolls-Royce.” The same too can be said of many British brands and products.
  And so, I hope many among you will take advantage of the wealth of opportunities offered by China’s regional cities and new markets. They present real economic benefits for British business willing to think strategically, as well as to the UK more widely. As a government we will continue to promote Britain as a leading investment destination. The trade missions by the Chancellor and the Mayor of London to China this month demonstrate our commitment to this. As we actively pursue business interests abroad, I would welcome your views on what else the Government might do to support exports and inward investment.

Further information

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Published 24 October 2013