Examination of Witnesses (Questions 120
- 135)
TUESDAY 4 JULY 2000
MR DAVID
BREWER, MR
ROGER CAESLEY,
LORD POWELL
OF BAYSWATER
AND MR
PETER NIGHTINGALE
Dr Starkey
120. Can I just return to one point about employment
practice, and that is equal opportunities. 70 per cent. of the
poorest in China, we were told, are women. Do British firms in
China operate equal opportunities policies? I cannot forbear from
remarking that the state of witnesses both now and in the second
half do not actually give me great confidence in the equal opportunities
policy in British business.
(Lord Powell of Bayswater) I cannot answer that with
any degree of expertise, other than to say I think each company
makes its own judgement about that.
(Mr Caesley) There is certainly no discrimination
in anything which we do as far as training is concerned. We get
some extremely good and very talented young ladies out of China
who, on their return, appear to rocket up their system, normally
faster than their male colleagues.
121. Which would suggest there is a great deal
of potential which is untapped there, which might also be the
case of British business?
(Lord Powell of Bayswater) I think that is a very
fair comment.
(Mr Brewer) I think also one has seen more women come
to the top both in politics and business in China than most other
countries I deal with in Asia. I would say in China ladies have
the most opportunity at the moment. Certainly in our company out
there we have a large number of ladies working in our office.
We have a lady manager, trained here. In the Great Britain- Chinese
Centre we have four ladies and two gentlemen.
122. The other point I wanted to pick up was
the remark which Lord Powell made about the ECGD, where you seem
to be suggesting that we should copy some of our other European
competitors in the aid that was going to British business. When
this Committee has been in various other countries we have actually
been given examples of where the support which France and Germany,
for instance, give to their businesses has actually not been particularly
helpful in the long-run. In that, it has either paid for projects
which ought not to have been funded in the first place and have
subsequently turned out to be white elephants; or it has encouraged
the contracts to be given to a firm who would never have won it
in open competition. Therefore, although it gets money in the
short-run, it does not actually build a continuing relationship
where those businesses are able to compete effectively in the
future. Could you comment on that?
(Lord Powell of Bayswater) There is, of course, OECD
consensus on these matters, but it is sometimes not scrupulously
observed, and we believe less scrupulously observed by our competitors
than by the UK authorities. What I was concerned with more was
that there might be a possible weakening of support from the UK
authorities for British companies, compared with the continuing
levels of support which our main competitor countries give to
their companies. I think later in the evidence you will hear this
morning, Dr Starkey, one or two big companies may be able to enlarge
on that from their own direct experience.
Sir John Stanley
123. I have two questions. First of all, to
Mr Nightingale. I was distinctly surprised earlier on by the impression
you gave in your comments, on greater movement of labour, freedom
of movement and freedom of foreign travel. You gave the impression
that the situation in China is now comparable to, say, Western
Europe or most other parts of the world. I have to say, that is
wholly contrary to the detailed briefings and discussions that
we had on this subject in China, where it was confirmed to us
that the extremely tight system of residential permits is still
in place, and people can only move from one area to another at
the behest and with the consent of the government. Equally, although
there has been a degree of improvement of access to passports
and the ability to get out of China, foreign travel is still the
preserve of those who are politically acceptable to the government.
Do you disagree with any of the comments I have made?
(Mr Nightingale) I am sorry if I gave the impression
that the situation in China was the same as in, say, western Europe
because that of course is not the case. What I was trying to draw
attention to was the fact that I think the situation has improved
from the status of 20 years ago when people were not allowed to
choose what job they did; they were not allowed to move around
at all and they were certainly very restricted in terms of leaving
the country. The situation has improved but I agree that there
are still a number of restrictions in place and it is not as easy
to apply for and obtain a passport in China as it is here, although
I think it is easier than it was. I suspect that the number of
visas that we are now granting to Chinese citizens to come over
here for business and for study, for example, indicates that it
is a little easier than it was.
124. The second question I would like to put
to any of you who would like to respond to this is this: as you
will be aware, there have been some extremely unfortunate public
comments made by representatives of the People's Republic in Hong
Kong, suggesting that members of the Hong Kong business community
have associated themselves with Taiwanese firms, and particularly
with any Taiwanese firms that had any inclination to support a
greater measure of independence of Taiwan from China would be
frowned on with great disfavour or worse by the Chinese authorities.
You will also be aware that Mrs Chan reacted extremely strongly
against any such attempts to politically intimidate the Hong Kong
business community. I would be grateful to know whether, in your
own contacts and in your own business environment, any pressure
has been exercised upon you and your members in terms of being
careful about who you associate yourselves with in the Taiwanese
business community?
(Lord Powell of Bayswater) To take the first part
of the question, I think the statements in question were regrettable.
They were short-sighted, counterproductive and they mostly came
from middle level officials who were plainly trying to curry favour
higher up the line. Mrs Chan's response was exactly right. No,
we do not have evidence that I am aware of in the China-Britain
Business Council of pressure being put on British firms in relation
to Taiwan.
(Mr Brewer) The same.
Mr Illsley: I wanted to come back to intellectual
property and counterfeiting. I appreciate you are saying that
the Chinese are more aware of this and are more likely now to
tackle this but we had a briefing when we were in China from Unilever,
and a similar briefing in Russia from Unilever as well, and it
looks to be becoming quite a substantial problem to Unilever,
who explained to us that there seems to be an acceptance within
China that counterfeiting is a legitimate way to enter into business.
They gave us examples of Chinese companies who had originally
set up copying other people's products, who then expanded into
their own products and themselves had been copied by other Chinese
companies. It was a continuous circle. We were also told that
there was, according to Unilever, a city in China which simply
exists on the basis of counterfeiting, producing everything, the
packaging for the products, the ancillary industries and all the
rest of it. Is it such a huge problem in your eyes? Do you really
believe that Unilever are right when they say it is costing a
lot of money and are the Chinese really cracking down on this?
Chairman: I am advised that the city is Yiwu.
Mr Illsley
125. Thank you.
(Lord Powell of Bayswater) We do not yet, as the China-Britain
Business Council, have an office in Yiwu so I am not sure I can
speak with any experience on it. I can make one observation. An
increasing number of western companies are manufacturing their
products in China and items which may be sold under a French or
American or British brand name here are manufactured in China.
The problem is often not so much that these products have been
counterfeited, that they rather they are being genuinely manufactured
for foreign companies, but often fall off the back of lorries
and are on sale at much lower prices in street markets in China
to the great benefit of casual visitors to China, but not as a
major problem. Counterfeiting is still a problem. The people who
have the greatest leverage over it and who have exerted that leverage
are the United States because America is now such a vast market
for Chinese exports that any threat of interference with their
exports does actually produce a reaction. The government have
tried to crack down a bit and have made quite a good job of doing
so, but the problem will always exist.
Chairman
126. We were told, in terms of films, that when
a new film comes out from Hollywood, it virtually arrives in China
almost immediately, sometimes, because it has been taken in a
cinema, with the audience in the cinema appearing on the CD itself.
(Lord Powell of Bayswater) I believe the same is true
for example of Windows tapes coming from American computer companies.
Mr Rowlands
127. I want to go back to one of the central
propositions that you put to us earlier and that was that commercial
growth and commercial development will be the engine for political
change. The thing that struck me, having not been back since 1989,
Tienanmen Square, was that in Beijing and Shanghai this huge development
is going on, this capitalistic explosion of development. At the
same time, I am sensing that it is still probably one of the most
restrictive, security conscious and surveillance conscious states
since the 1980s in eastern Europe. The Chinese authorities are
working on the proposition that economic change can go alongside
and in no way fundamentally affect the role and function of the
Communist Party and the state apparatus in political terms. Your
observations challenged that assumption. Where lies the evidence?
Why will not a commercial class be allowed to do what it likes
commercially, travel, move money around? Why should it necessarily
become the source of political change when Chinese entrepreneurial
satisfaction has been achieved? Why should it bother to be politically
dissatisfied with such an arrangement?
(Lord Powell of Bayswater) Those are very fair questions
which cannot be answered in any absolute sense. The record of
most of us in this part of the world in predicting political change
in other countries has not been exemplary. None of us predicted
the speed at which Communism disappeared in Russia. I would draw
my main comfort from the experience of countries like Taiwan and
South Korea, where economic liberalisation very definitely preceded
political change but was followed by political change within a
measurable time scale. By that, I mean a period of about 20 years
or so. Because that has happened elsewhere in Asia, I would tend
to think the same thing will happen to a degree in China. I do
not suppose it will be western style democracy in China; it will
just be a steadily improving, more liberal, more open society.
The pressures of things like the internet will just add to that.
I agree entirely with Mr Mackinlay. I do not think you can keep
the internet out of China, however hard you try and whatever restrictions
you impose. People will find a way round them. The pressures from
business will find a way round them. You cannot conduct modern
business without access to the internet. If they want to build
Shanghai into a major financial services centre, the internet
there will have to be and free flow of information there will
have to be. The market exists on the basis of a free flow of information.
128. The structure compared to eastern Europe,
say, and maybe we should look to the Taiwanese rather than the
eastern European experience—there is no Solzhenitsyn and
there is no Havel around. It does not look as if the Chinese intellectual
class is going to lead the change like they did in eastern Europe.
Therefore, do you think it is going to be a curious, natural process
of information technology and the rest of it gradually undermining
and corroding the control of the state?
(Lord Powell of Bayswater) Yes, I think you put it
really rather well. I would say that China was more likely to
follow in general terms what happens in South Korea and Taiwan,
and even to a degree Singapore, than it will the east European
experience.
Mr Mackinlay
129. Is there anything we can do or say which
would advance the internet? I cannot help feeling that it is almost
as if the reality has not dawned upon the Chinese authorities.
They still think they can retard what is demonstrably in their
commercial interests. There is a down side perhaps that there
might be politically contagious democratic thought but is there
anything we can do?
(Lord Powell of Bayswater) I tend to think the best
guide is the old Chinese saying that valleys are deep, the mountains
are high and the emperor is far away. A great deal goes on in
China which the people in Beijing cannot in the end control.
(Mr Brewer) One of the judges studying over here said
that there are three ambitions of young Chinese growing up today.
First of all, to be able to speak good English; secondly, to be
computer literate; thirdly, to drive a car.
Mr Rowlands
130. The irony of the situation might be, when
you say Taiwan might be the model, that that has created the greatest
fear, the notion of seeing across the water a party that had not
lost an election lose one. It does not encourage one to have elections
where you can lose.
(Lord Powell of Bayswater) It happened in South Korea.
Ten years ago, South Korea was a military dictatorship. It is
now a very democratic system.
131. Is the China-Britain Business Council trying
to build into their thinking in the next X years a growing problem
in Chinese/Taiwanese relationships which could rock and create
a degree of instability politically and economically?
(Lord Powell of Bayswater) Obviously, in reaching
our business decisions, we try to take account of our assessment
of what is happening in the wider region in Asia, what may happen
and the risks. Any sensible business has to balance all these
risks in. I believe at the moment most British companies believe
that there is a potentially good market in China worth pursuing.
They are not deterred from doing that by worries about how the
strategic situation could change, but we all read our newspapers.
Many of us visit America. We all understand the problems of US/China
relations. It is part of the broader picture we have to take into
account.
Sir John Stanley
132. Lord Powell, I think you have said to us
a couple of times that the British business philosophy in dealing
with China is to try to import the best of British practice into
China but, in the course of our visit, we were told repeatedly
that corruption was endemic in China. I should be grateful if
you and your colleagues could give us an indication as to how
you manage to deal with that particularly contradictory situation.
Do you for real take the view that British companies are going
to have to engage in corrupt practices in China as the price of
being able to do business? Do you expect British companies to
adopt the same standards in dealing with China as they would in
this country and in the free world and suffer commercially as
a result? Do you regard this as too difficult an issue on which
you would not want to take a position?
(Lord Powell of Bayswater) Not at all. We take a very
strong view on it. We do not encourage British companies to engage
in any sort of corruption in China. Each company makes its own
decisions. We do not dictate to companies what they do. My experience
is that all of them set guidelines and rules for the conduct of
their staff and their business in China which makes it an offence
for them to engage in corruption of any sort. Of course, there
would be great dangers for them in doing so. If they were discovered,
the penalties under Chinese law are very severe and I do not think
many British companies would want to engage in corruption in China.
Certainly we would discourage it very strongly indeed if we were
ever asked.
(Mr Brewer) If one has seen occasions where it has
happened in other countries, it is very short term because if
they do pay money to some person in a position he is not there
probably in two months' time. Not only have they backed the wrong
horse; they have actually been seen to put money on that horse,
which does not stand anyone in good stead at all. It really does
not help. There are many ways in which one can much more constructively
and openly further the development of one's partners or one's
clients there and that is by training, by bringing people across
here to study. That is a way of supporting an organisation but
above board on both sides.
(Mr Caesley) I would agree that the way to influence
is by helping them, for instance, in training their managers and
supporting the development of their activities.
133. In this area, as there may be possibly
other companies within the EU who may not take the same laudable
position which we have heard our witnesses taking this morning,
do you think this might be an area where the EU could join together
and produce some form of code of practice as, under the present
government here, has been done for example on arms exports, to
try to get all EU members to sign up on a particular anticorruption,
non-corruption business practice code which would ensure hopefully
that British businesses were not undercut in this area by less
scrupulous companies operating elsewhere in the EU?
(Lord Powell of Bayswater) My reaction to that would
be that it is best left to employers and company organisations
in Europe rather than to governments. If it was done through organisations
like UNICE—I cannot remember the acronyms of some of the
other associations—that would be the best forum in which
to do it and I think it is a good suggestion.
Chairman
134. Gentlemen, there are more subtle forms
of corruption than brown envelopes and rice envelopes. Perhaps
related to training, one hears stories of sons and daughters of
the nomenklatura being given scholarships in the United Kingdom
or coming over for training purposes. Is that unknown to you?
(Mr Brewer) People have been known to come to meetings
with Harrods bags.
(Mr Caesley) I have an example where a gentleman who
is the son of a minister is going to be trained, but he is going
to be trained because he is capable of undertaking that training
and has got there through his own merits and has passed all the
exams and tests to ensure that he is trained. We make no special
allowance at all for background or parentage. They have to stand
on their own two feet. The Chinese, in my experience of having
been responsible for the training of a large number of Chinese,
all without exception work incredibly hard, are very impressive
students and the great thing about them is they go back to China
different people to the people who came. From that point of view,
it is a great benefit to the United Kingdom.
Mr Illsley
135. Could I ask for your views on visa issuing?
Do you think the United Kingdom is up to speed on issuing visas
for visitors to this country or do you think there are problems
which need to be investigated?
(Lord Powell of Bayswater) It is getting better. It
was very bad indeed. Long delays were experienced. It was a great
source of aggravation for British companies, getting staff from
China over here for training and doing business and for students
as well, but the procedures have been speeded up considerably
and it is getting better.
(Mr Caesley) The British Council, for instance, are
working very closely with the visa section and the issue of visas
has certainly improved in the last couple of years.
(Mr Brewer) We can issue visas now outside Beijing.
It is still perhaps slower than some of our European rivals, but
it is much better.
Chairman: Gentlemen, on behalf of the Committee,
very many thanks.
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