Examination of Witnesses (Questions 140
- 159)
TUESDAY 4 JULY 2000
MR TOM
GOLDBERG, MR
STEPHEN PERRY
AND MR
JAMES RICHARDS
140. Do you feel that you should legitimately
have expected that sort of detailed, specialised advice from either
the China-Britain Business Council or from our commercial offices
in Beijing in the consulates general?
(Mr Goldberg) I do not think we regard it as being
a kind of right that all British exporters should have that kind
of assistance available. It would clearly be helpful if it were
available. My own belief is that the China-Britain Business Council
is moving in the right direction because it stands in really for
BTI in terms of China. If the government has funds available,
they should certainly apply them to that particular market and
to that particular organisation, to enable them to buy in that
kind of specific expertise, but we have gone into many areas of
the world without that kind of back-up. We have built in the Falkland
Islands. We have built in Iceland and we have built Coca-Cola
plants in Belarus. We do not have specific back-up to be able
to do that kind of thing.
141. Mr Perry, are there things which your business
associates expect from the Business Council or from the consulates
general which they are not at present receiving?
(Mr Perry) There are a number of fields where there
is room for improvement. I want to preface my remarks by saying
that there are an enormous number of people working very hard.
When one is talking about room for improvement, one is not being
critical of people. In the field of large companies, there is
a lot of room for improvement in risk assessment of the situation
in China. There is a lot of room for improvement in the experience
of what goes on in big company activities in China. Some of those
will go into quite detailed points of activity in China and we
believe those experiences will be collectively very helpful. In
the field of SMEs, there is the difficulty of the confusion of
organisations that exists between the SME that wants to get information
and the person who is in a position to provide it. I am not stopping
to address that particular issue at the moment but it causes a
lot of difficulty for SMEs. When one talks about the actual information
that is available, there is a problem about making sure that the
experience which Mr Goldberg referred to is available to those
who are looking for answers to questions. There is too often the
use of people whose job it is to administer an operation, giving
advice on things which would be better sought from people who
are experienced in facing those challenges.
142. Do your business associates look to the
official services to open doors, to be middle men and women or
do they look for specialist advice?
(Mr Perry) The bigger companies look for help in marketing
within government departments inside China. They do not expect
the infrastructure to operate as middle men, providing the services
of bringing deals to a conclusion. They will expect that they
can access expert advice. Whether they pay for it or not is another
matter, but in order to be successful they need to get that advice.
They need to know where to go to get the expert advice, or they
get a group of names on each particular issue that they can go
to; and that that advice is easily available, preferably at an
economic rate.
143. Mr Richards, you represent a large company.
What is the extent of your commitment in the market and what do
you look for from companies' services?
(Mr Richards) First of all, our commitment in the
China market is strong. It goes back to 1963. It has been growing
and looking to the future we expect it to continue to grow. Over
the last 20 years, the aviation market, which is perhaps the most
significant part of our business in China, has grown faster in
China than anywhere else in the world, although it has dipped
severely over the last two years or so. Best estimates available
suggest that the market will continue to grow at least as fast
as, and probably faster than, aviation markets in other parts
of the world over the next 10 to 20 years, assuming underlying
stability.
144. And the official services?
(Mr Richards) As far as official services are concerned,
we differ from the SMEs in that we have a significant presence
in the country. We set up offices in Peking in 1978. We have a
lot of people there on the ground and a lot of experience. We
do not look for the day to day, hands on support and guidance
that smaller companies coming into the market might look for and
need. What we do look for is a good and open dialogue on risk,
on opportunity, support when political lobbying can be helpful
and all the things that a sensitive embassy can provide.
145. Do you receive that?
(Mr Richards) We do. In my time over the last three
and a half years working in the China market, we have received
excellent support, willing, helpful, sensible support from the
embassy and from departments in London, notably the DTI aerospace
people and the China and Hong Kong Department in the Foreign and
Commonwealth office.
Mr Rowlands
146. Were all three of you involved in (a) the
state visit and (b) the Prime Minister's visit to China?
(Mr Richards) I was. We were, yes.
(Mr Perry) I attended some of the functions when the
President of China visited here. I was not involved in the Prime
Minister's visit.
(Mr Goldberg) Some of my staff in Shanghai were at
the reception for the Prime Minister out there. He kindly countersigned
our Queen's Award for Export.
147. Did you hear the evidence of the witnesses
who preceded you?
(Mr Richards) Yes.
148. You did not see these as opportunities
to go for specific objectives and achieve certain specific contracts
or arrangements from either the state visit or the Prime Minister's
visit?
(Mr Richards) We did think that the improvement in
relations following the return of Hong Kong to Chinese sovereignty,
leading up to Mr Blair's visit in the autumn of 1998 and then
leading through to Jiang Zemin's visit to the United Kingdom towards
the end of last year, was an opportunity for lobbying on behalf
of our business in China. We saw opportunities to do additional
business that was in our interests and, we believe, strongly in
the interests of our Chinese customers. Although the precise business
remains commercially sensitive and confidential, we received good,
effective help which did make a difference, the kind of help which
we would expect our competitors also to receive from their governments.
Our major competitors in the China market, as elsewhere, are two
very large and significant American companies, General Electric
and Pratt and Whitney. They are able to pull political strings.
They have huge resources and not to be disadvantaged we need strong
support from our government, and we receive it.
149. Specific utilisation of the state visit
and the Prime Minister's visit was vital in that context?
(Mr Richards) They were significant in advancing our
business, yes.
(Mr Perry) Given the enormous amount of negative propaganda
that there had been in China about the United Kingdom leading
up to the Hong Kong hand over, it was of tremendous value for
business and for other initiatives that the Chinese could be seen
being relaxed, visiting Britain and having better relations with
Britain. It took away some of the cobwebs that had been there
before.
(Mr Goldberg) I was part of a construction mission
in 1996 which was ministerially led, which was quite specifically
useful, but the generalised missions are a bit beyond our company's
interests.
150. Since Tiananmen Square, there has been
an embargo on military sales of one kind or another. Has that
affected your business at all?
(Mr Richards) No, simply because to my knowledge there
is very little military business being done in China by any British
companies. Rolls-Royce in 1975 under an export licence issued
at the time transferred the technology of the Spey Mark 202 engine
to China and the manufacturing technology to make the engine.
This goes back now 25 or 26 years. We have continued to support
that programme as an old piece of business. Otherwise, we have
had nothing going on that has been affected. Had we had any business
to do, we should have operated within the appropriate security
classifications and sought any licences that might be needed.
151. But you have not sought any such licences?
(Mr Richards) We have not needed so far to have a
licence to do further business.
152. Do you operate under open licences?
(Mr Richards) No. Any new, significant item of business
might need an export licence. It would depend on the category
of the business.
Dr Starkey
153. Mr Richards, you will have heard in the
previous session Lord Powell citing Rolls-Royce as an example
of where British business had been disadvantaged by our less generous
support for industries than some of our European competitors.
I wondered if you wanted to expand on that?
(Mr Richards) Thank you for the opportunity. So far,
I do not think that we have actually been disadvantaged, but we
fear that we may be moving into territory where we could be seriously
disadvantaged. First of all, I should say by way of background
that all aviation deals in China involving aircraft and aero engines,
which are externally financed, are supported by government credit
support agencies. In the case of our American competitors, the
agency is the EXIM Bank. In the case of the Germans and the French,
it is COFACE and HERMES which provide support. What is important
for us, given the extremely competitive nature of the market in
China and the fact that export credits are available for our competitors,
is that we should be no worse off, that we should receive equivalent
treatment, because without it our business in China would certainly
be undermined.
154. This is a fear on your part?
(Mr Richards) The fear arises because the mission
and status of ECGD have been under review and we have noticed
some changes in ECG practice, not yet in relation to China, although
we hope that new business will be coming up requiring that support
in China very soon, but those changes in our view begin to place
us at a disadvantage. The story is a little complicated. If you
want an example of the kind of thing, I could give it to you.
Chairman
155. It might be helpful if we had a memorandum
with a particular case study where, in your judgment, our exporters
are being disadvantaged compared with their competitors.
(Mr Richards) I am sure we would be happy to provide
that for you. The concern in China is that the aviation deals
there do need credit guarantee support. They always have and,
in the foreseeable future, are likely to need it. If we were not
to be on an equal playing field, our business would be undermined.
That is not too strong a word.
Mr Rowlands
156. Mr Perry, I have not quite worked out what
you export. What exactly, in London Export Limited, do you export?
(Mr Perry) Fundamentally, we consult with medium,
large and small corporations on achieving long term market share
in China and helping them to implement the achievement of that.
157. You are a consultancy?
(Mr Perry) Yes, but we get paid on our results. We
are not a fee based organisation. If we do not deliver, we do
not—
158. Which type of companies or which type of
products do you actually export?
(Mr Perry) Mostly public corporations in the field
of machinery and chemicals. Two of our clients are in the entertainment
and sports field.
159. The football field?
(Mr Perry) Could be, yes, an opportunity to combine
business and pleasure.
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