Select Committee on Foreign Affairs Appendices to the Minutes of Evidence


Memorandum submitted by The British Chamber of Commerce in China

  The British Chamber of Commerce in China (BCCC) submits the present Memorandum in support of the Foreign Affairs Committee's inquiry into the "Role and Policies of the Foreign and Commonwealth Office in relation to the People's Republic of China". This Memorandum has been prepared by the Committee of the BCCC and reflects the views of the Committee and of the British business community in China as these are known and understood by the BCCC and with particular regard to the business community in Beijing. A description of the BCCC and its activities is set out at Appendix B.

  We preface our Memorandum with two comments. The first is that the views and experiences of the British business community in China reflect broad satisfaction with the commitment of the FCO to China and with the quality of FCO support, particularly the Embassy in Beijing (with which we work most closely) for British business on the ground.

  The second is that this satisfaction notwithstanding, the BCCC is of the strong view that there is much to be done in strengthening Britain's interface with China—for the benefit of Britain and in the interests of promoting stability and an improvement in human conditions both globally and within China itself. In this, the BCCC is of the firm view that the balance of this challenge lies with the British government overall and as much in the co-ordination of inter-ministerial activity as with the improvement of the activity of any individual ministerial body.

  China already attracts a considerable amount of government resources: the challenge for government (including of course, the FCO within government) is to increase the focus and efficiency with which these resources are expended. Some sense of the scale and complexity of this challenge may be illustrated by the following snapshots:

    —  As a country of strong economic and political significance, China has inspired the establishment of a large number of British entities (government, quasi-government and NGOs) with a China focus, each of which pursues individually formulated objectives; attempts at co-ordination are made (not least the FCO's mobilisation of its Map Room for quarterly reviews) but success is limited by the sheer numbers involved and the effective competition between them.

    —  The promotion of trade and investment is considered to be of considerable importance by government and industry alike: this is based not only on perceived opportunities but also on the recognition of China's characteristics as a "Great Game Territory" (ie a country of strategic significance beyond its actual commercial value, particularly in the context of global industries such as telecommunications) and as a laboratory for new ideas and technologies in a country which has experienced and continues to experience (and to demand) unprecedented levels of change and innovation.

    —  With specific regard to the promotion of trade and investment in China, government support and funding is channelled through three specific entities: the DTI/BTI, the FCO and the China -Britain Business Council ("CBBC", incorporating the 48 Group); the CBBC is unusual in that it combines a government focus on trade promotion with the provision of services to member companies (principally but not exclusively companies which are approaching China from a UK base and without a Chinese presence). We understand that considerable attention is being given to establishing closer integration of the activities of the BTI and the FCO overall and that the BTI is shortly to publish a report with specific recommendation for China.

    —  Co-ordination of these three entities inter se with the Chambers, the British Council and the IBB is sought through quarterly meetings of the British Business Forum (BBF).

    —  Further with regard to the promotion of trade and investment in China, there are areas of overlap between government and private sector activity.

    —  The regional (and ultimately) global importance of China means that trade and investment in and with the country naturally assumes political significance; this is accentuated by the fact that the economy is and has (since 1979) been a key focus of political attention within Chinese government; it is also accentuated by the fact that many of the countries of the western world compete for a strong position in Chinese economy and within individual Chinese industries.

    —  Historical involvement of Chinese government in industry coupled with international competition for strength within Chinese economy has resulted in a certain degree of politicisation of access opportunities in the more important areas of the economy; while ambitious government reforms are changing the relationship of government and industry, national origin and the quality of home government support on the ground can still be a factor in winning business (for example, major infrastructure and financial services).

    —  Britain's relationship with Hong Kong offers a special dimension to the British commercial interface with China. The expertise and experience available within Hong Kong offer enormous opportunities. In its natural concern to retain its strength both as a base and launch pad for British business approaching China, Hong Kong is, however, increasingly competing with the more developed centres of the Chinese economy, most notably Shanghai and Beijing. This creates almost unique challenges in the management and co-ordination of government support.


  As noted in our prefatory comments, the views and experience of the British business community in China reflect broad satisfaction with the commitment of the FCO to China and with the quality of FCO support for British business on the ground. Many of our members have considerable experience in business development in other parts of the world and there is a fairly clear consensus that the present level and quality of support provided by the Embassy and the Consulates compares very favourably with experience in other parts of the world. These views are shared by the Chamber itself, which has a strong and proactive dialogue with the Embassy within which there is an active exchange of information and experience—in both directions.

  There is room for improvement, but this is principally with regard to the level of resources available, to the channelling of those resources as between the three principal conduits for British government support in China (the FCO itself, the DTI/BTI and the CBBC) and to the co-ordination of action not only between these three principal conduits but the broader plethora of entities (government and quasi-government) which have an engagement with China.

  Overall, the BCCC is of the opinion that greater value is delivered where key individuals are in post for a longer rather than a shorter period and/or where they bring the benefit of previous experience of China. Linguistic skills are increasingly important. Secondees with industry expertise (particularly in the new economy) whether from the private sector or from government/quasi-government entities with a specific industry focus are also seen as adding value.

  Given the locus and focus of the BCCC's activities, our principal interface with the FCO is through the Embassy in Beijing and in the context of visits of FCO officials and Ministers to China.


1.1  Standards Set by the Calibre of the Ambassador

  The political work of the Embassy is underpinned by the fact that the Ambassador, Sir Anthony Galsworthy, is a highly gifted observer and analyst of Chinese political conditions, able to draw on a lifetime's interest, and professional involvement as a career diplomat, with China. Strong language skills, supported by an active engagement in the diverse provinces of China, enable the Ambassador to form his own opinions by direct reference to actual developments on the ground and to set testing standards for his staff. In our view these qualities are critical assets for the Embassy in Beijing.

  Certainly, the experiences of 1999—politically, a highly charged and difficult year—showed the importance and value of an Ambassador who brings perspective and experience. With specific regard to the aftermath of the Belgrade bombing, British business was well informed and with such information, able to take a measured approach to a potentially frightening situation. Equally, the Ambassador's active dialogue with the BCCC—including the value attached to Chamber input on commercial and political conditions—was an important factor in maintaining confidence.

1.2  Supported at the Level of Minister

  The Chamber considers that it has been well served by successive Ministers, including (now Sir) James Hodge and Tony Sprake, both of whom demonstrated enormous commitment to the business community.

  The recent arrival of Nigel Cox as Minister with (for the first time) fluent Chinese language skills and a career involvement in China (including previous Political Counsellor in the Embassy in Beijing), is a welcome reinforcement of specialist skills and one which we hope will be continued.

1.3  Quality of Political Expertise and Analysis Strong

  With John Everard and through his immediate predecessor, Rod Wye, the Embassy continues to deploy strong political analysts with considerable expertise.

1.4  Political Sensitivity in the Commercial Section

  Although not a China specialist, Christopher Segar, Commercial Counsellor is highly regarded for his sensitivity to the political dimension in commerce. Again, the regular and reciprocal exchange of information between the Chamber and the Embassy creates strong business confidence in the work of the Commercial Section.

1.5  Not Sure About Scenario Planning

  While it is clear that the Ambassador and his political advisors are both well informed and perceptive about future developments in China, the level of FCO resources dedicated to long term scenario planning, particularly at the interface of the political, social and economic axes, is less apparent. As the level of British investment in and trade with China grows, there is a strong need for long term (five years and beyond) scenario planning and analysis. This is a need which is not well met by any entity of which we are aware, public or private. As far as private sector needs are concerned, as the FCO reappraises its role in a vastly changed information environment, this may be an area of commercial activity which it might like to consider (we return to this below in Appendix A).


2.1  A Clear Mandate to Support British Business—At Every Level

  The Embassy has a clear mandate to support British business and one which we feel it carried out well at every level.

  The Ambassador is committed to an open door with the British business community which is reflected not only in his substantial support of individual business but in the level of his personal commitment to the Chamber. Our members are actively encouraged to bring their problems to the Ambassador and to share their experiences (good and bad); British Business Briefings (the Chamber's monthly meeting) include an Embassy briefing covering political and economic analysis through to ministerial visits and events; the Ambassador's own briefings to the Chamber (generally every quarter) are valued and well attended.

  The Commercial Counsellor works closely with the British business community—and his commitment to providing personal support in resolving difficult issues has been noted by a number of members who credit his intervention with tangible commercial success. The Chamber invites the Embassy (as it does the British Council and the CBBC) to attend monthly Committee meetings as an observer and there is an established exchange of information and initiative between the office of the Commercial Counsellor and the Chamber. Christopher Segar is receptive to new ideas—particularly in the area of emerging industries—and quick to identify ways in which private sector expertise can be harnessed for broader British benefit (whether in the briefing of visiting British government officials or business or in the creation of specific Sino-British forums incorporating government and industry on both sides).

2.2  Investment in National Coverage

  It may seem facile to draw attention to the geographical size and complexity of China but it is important to appreciate that the country is far more like the European Community of the 1970's than the United States of America today. Against this background, accurate local intelligence is critical. Private sector support is strong in the developed areas of the country but very weak in the interior and western parts. Against this background, the opening of the British Consulate-General in Chongqing, has been widely welcomed. Given the Chinese push to develop the interior of the country, this is an important location and Britain is the first country to secure such representation. Our success in this is largely attributed to the foresight and tenacity of the Ambassador.

2.3  Trade Promotion Strong

  The Commercial Section of the Embassy provides strong and valued support in trade promotion. In addition to Christopher Segar, individuals who are seen to have made particularly strong contributions are George Squires and Siobhan Peters (whose assessment of the WTO position has been consistently strong).

  Again, we feel that the level and quality of co-operation between the Embassy and the business community has been a key feature in success. The Britain in China campaign, originally proposed by the BCCC and initiated jointly by the BBF, has been enormously successful and the Embassy's support and reinforcement (through published materials and a variety of "branding" exercises) have provided an important and valuable focal point for British business development. This momentum should be sustained.

  Looking to the more general range of trade promotional materials produced by the FCO, we are impressed with the breadth and quality. Publications on a range of British industries (from science and technology through to the arts) can play a valuable role in ensuring that British business in China is fully up to date with innovation in the UK. Access to this information enables our business community to be a more effective ambassador for Britain while providing individual British businesses with valuable information. Distribution appears, however, to be weak. The BCCC sees itself as having an important role in disseminating such material to members and Chinese counterparts for maximum effect and a recent suggestion to this effect was enthusiastically received by the Commercial Section of the Embassy. Cost may be a factor but it would be possible, if necessary, to produce a summary (along the lines of "This Week") and/or distribute on-line.

  With regard to on-line distribution of information, we note that the FCO and the Embassy have invested substantially in new information technologies—this investment is already showing results.

  The China-UK Forum is seen by the BCCC as potentially valuable platform for building business within a broad framework of dialogue: there is, however, concern that the new structure for managing this forum should resolve the not inconsiderable difficulties which affected the 1999 round. Again, key concerns relate to co-ordination and to the achievement of clarity and focus (both in individual working groups and overall). The BCCC is keen to see close co-operation between the planning and execution of the next round (October 2000, in Beijing) with the local British business community.

2.4   . . . But Research Weaker

  Focused research on specific issues is good but the actual spread of issues covered is limited and lacks a sense of prioritisation based on the fundamentals of the Chinese economy—present and future. We see this as directly related both to the fragmentation of British government support and to the fact that limited research resources are often directed towards the chargeable enquiry services provided to individual companies.

  We hope that the BTI report referred to in the Preface will include some recognition of the need to identify research targets with an eye to long term planning needs as well as immediate information needs; that such research targets would be co-ordinated across the various government and quasi-government agencies involved with China; and that individuals charged with research tasks would be given access to the resources and time necessary to deliver a professional result of the broadest possible value. These are critical if Britain if to get the best value for investments made in trade promotion.

  Following an information mapping project undertaken by the BCCC ("Mapping China"), we consider that the BCCC can play a useful role in identifying areas of research attention required (and in ensuring that there is no replication of areas already covered by private sector research). The Ambassador and Christopher Segar have been highly supportive of information sharing initiatives such as Mapping China and we understand that the Embassy is receptive to the idea of working more closely with industry to identify and pursue research targets; this might best perhaps be done through the BBF.

2.5 . . . And Longer Term Analysis Again Limited

  While the calibre of individual analysis (from the Ambassador through to the Commercial Counsellor and key commercial staff) is strong, we feel that there is real scope to strengthen the range and level of longer-term analysis. We sense that the challenge is one of resources but we would urge the British government overall to invest in thinking about the risks and opportunities of the future—and to work with British business to explore the future implications of present day Chinese policies. These implications relate not only to British business interests pursued in China but to the opportunities and challenges of Chinese trade and investment at home and to the impact of China (and its working population) on the global economy and the preparedness of Britain to maximise opportunities and minimise risks. It is important not only for business but also for the British government in policy formulation—domestic and foreign.

  Such work is expensive is terms of the quality of human analysis, the breadth of disciplines and the time required. Within the private sector and as such, it is presently limited in affordability to major British multinationals drawing on (scarce) private sector expertise. In an age of instant information, we think that one of the USPs of the Embassy and the FCO is the ability to aggregate information across the political, economic, social and commercial divides and, working in partnership with private sector resources, to offer some projections (with the benefit of centuries of experience) into the future. Building to some extent on the rationale of Wilton Park, we think that the British government through the FCO and the Embassy could provide real value to a broader range of British businesses (both in China and at home) at an affordable cost—and that the BCCC could play an important role.

2.6  SMEs

  The Embassy works hard to support SMEs—as do the CBBC and the DTI/BTI. Again, however, fragmentation of effort across agencies seems to be diluting the value of work carried out. Equally, we see clear scope for reviewing the potential of an enhanced public-private partnership, particularly given the very large number of consulting and advisory services focused on China and the difficulty of providing up to date industry advice across the breadth of China and of Chinese industry.

  China can provide opportunities for SMEs; it is however a complex market. Government advice and support can create success. Success for government should not however be judged by the number of British SMEs in China—properly reached, a decision not to invest, can also represent a success. Quality of results rather than quantity of business on the ground should be the defining factor in appraising government action.

2.7  Hearts and Minds

  China is a process rather than an event. Most British business sees this market in a long-term perspective and value individual experience accordingly. The British Embassy has a strong commitment to fostering ties at the level of the individual, reaching out not only to individuals in our own community but also to Chinese nationals who have worked or studied in the UK. The Embassy is also closely involved in a number of exchange and training programmes. We feel that more can be done—not necessarily by the FCO and the Embassy per se—buy by developing a broader government strategy for winning hearts and minds in China, and for training British nationals for a lifetime's involvement in China. Again, some longer-term thinking is required—and a public-private partnership at the earliest stage of conceptualisation and planning would be a strong factor of success. We sense a broad agreement on the importance of such action within the BBF but implementation remains elusive.


  The Embassy receives almost consistent applause for the quality of its visa services. Facilities and staff have been expanded and there is a clear appreciation of the important role of visa issuing in the promotion of commercial co-operation. Members have often commented on particular examples where visa staff have worked beyond the call of duty to get particular Chinese delegations to the UK (the most noteworthy example perhaps being in the days following the Belgrade bombing where a CAAC delegation booked to go to Spain, in fact altered their plans and travelled to the UK because of the speed and efficiency of Britain's visa processing—this notwithstanding that our visa staff were working in that part of the city most directly affected by the local disturbances, in contradistinction to their Spanish counterparts over a mile away).

  There is however sustained concern over present Home Office measures whose practical effect has been to create an underserved sense that the United Kingdom is a difficult country to visit. While we appreciate the underlying problems which these limitations are designed to address, we are of the strongest possible view that alternative measures could be developed which would limit damage to British business while protecting the justifiable concerns of the Home Office.

  There are two particular issues involved. The first is the requirement for Direct Airside Transit Visas (DATVs) for the UK which effectively discourage Chinese business travellers to Europe from stopping over in Britain. Given that many Chinese nationals (particularly government officials) try to fit in multiple countries on a single visit and given that a stopover of 24 hours or more can represent a unique opportunity for offshore (often the most productive!) discussion, the imposition of DATVs is a problem.

  The second is that Britain remains outside the Schengen agreement—with the result that Britain sits outside the one-stop European shop that visas from Schengen member countries provide.

  Together, these limitations exert a negative pull on British business with China—and contribute (sterling efforts of the Embassy's visa section notwithstanding) to a more generalised Chinese perception that it is hard to get to Britain.


  Our members appear to be happy with the consular services provided: anecdotal evidence certainly indicates that great care is generally taken to assist British nationals in difficulty or distress.

  It is important to note however that the nature of the Chinese legal system and the position of foreign law firms in China, is such that British nationals have a broader need for assistance than they may have in other jurisdictions. The Chinese legal system continues to develop and by far and away the greatest focus has been in the area of commercial law—also the area where all foreign legal resources are focused. Chinese lawyers do provide advice on criminal and civil matters but such lawyers often lack English language skills. At the same time, the differences in the English and Chinese legal systems (and thus the expectations of British individuals and Chinese lawyers) can mean that communications are frustrating.

  For British nationals with civil or criminal problems, there is a clear gap in private sector service provision which cannot be met effectively by the Chinese legal profession and which is not met by the foreign legal community. Embassy and Consular officials are clearly not professionally qualified to provide legal advice—yet they are often the only accessible individuals to whom a British national can turn. As more British nationals come to live and work in China, this challenge is likely to grow. The Embassy has actively reached out to the British legal community in Beijing and over the last year, the BCCC has identified a small group of British law firms who are prepared to provide advice, drawing on the expertise and experiences of colleagues in the UK and often on a pro bono basis.


  As a country in a state of almost perpetual change across almost every facet of life and as a country which sites at the vortex of some of Asia's most important political axes, there are many developments in Chinese politics which affect the UK in developing a constructive foreign and security policy relationship with China, in promoting human rights and in reducing the threat of weapons proliferation.

  We have identified some of the most pressing policy issues in Appendix 18 but think it important to observe that while China has spent the last 20 years firmly focused on the international dimension, we expect the next 10 years to see a shift in focus to the domestic forum. In this respect, we expect to see China grappling with difficult issues of transition in employment (particularly in agriculture post WTO where China stands to be most affected, and likely to be aggravated by concerns over future drought caused in part by high levels of environmental degradation) and with the opportunities and challenges of building new forms of entrepreneurship within what is widely expected to be one of the most ambitious information economies of the world. Given high levels of British engagement coupled with the strategic significance of China both regionally and in the global economy, this change in focus is likely to be no less significant for Britain's relationship with China.


  The present focus on dialogue is important—and the strongest basis for a constructive relationship lies in the establishment of a strong platform for sharing experience and ideas. The China-UK Forum has strong potential but needs further work. Wilton Park provides an excellent forum for bringing together private and public sector input and the China Beyond Fifty conference last year was a great success which we think could be replicated—possibility here in China.

  As far as the Chamber's experiences are concerned, we feel that a strong and positive relationship has been established with the Embassy in terms of ensuring that our community is fully briefed on broad foreign policy and on specific security issues. Again, the response to the Belgrade bombing illustrates perhaps most clearly how successfully this relationship works under times of pressure. Within hours of the incident, the Ambassador was in touch with senior members of the British business community and an exchange of information between public and private sector facilitated the delivery of what we believe to have been a clear picture not only to the Chinese response to the bombing but of the response of the Chinese government to the British response. This level of communication facilitated supplementary action which formed the basis for remedial action again, within a framework of Embassy/business community co-operation. The subsequent visit of Sir John Kerr who spent time with leaders of the British business community permitted further exchanges of information and provided an opportunity for the FCO to hear the views and experiences of the British business community direct and vice-versa; it also provided a strong degree of confidence in the FCO's commitment to protecting British business interests in a highly charged political setting.


  One of the most difficult areas of any country's interface with China, the discussion and development of human rights requires the highest skills of diplomacy over the long term if real and lasting results are to be achieved. At the same time, while the balance is difficult, the reality is that direct confrontation, poorly handled, has a direct and negative impact on business. To the extent that business provides a platform for dialogue, this is not only a problem for the business community but one which affects the longer term scope for discussion and exchange. The value of engagement has, in the view of the British business community, been borne out by the experiences of the past 20 years where enormous improvements have been made in the meeting of basic human needs and in the respect of individual rights. Against this background, and while we would not consider ourselves qualified to comment on the broad structure of policy with regard to human rights, we would, however, make two comments.

  The first is that any promotion of human rights in China requires—above and beyond diplomatic skills—a thorough understanding of the fabric of life in China. China sees human rights as a broad issue which is as much—and indeed more—concerned with economic and social well-being as with the political rights of the individual.

  Clearly there is strong disagreement between China and its critics on this point. In the experience of our members—some of whom have spent a decade or more in China—the strongest response and engagement is secured where there is a clear attempt at understanding China's existing social, economic and political initiatives—and the domestic context within which these measures are pursued. China is undertaking one of the most ambitious reform and restructuring programmes ever to have been adopted, in a country with the world's largest population and with a strategic significance which places it under the most active of international scrutiny. We feel that the Embassy in Beijing has a strong grasp of the complexities of the situation and, indeed, sharing information and perceptions is an important and successful part of the interface established between the Ambassador, his staff and our members. Yet international press reporting of the social and economic challenges faced by China is uneven to say the least. With a strong focus on commercial stories (particularly those affecting foreign investment) and on high politics, very little information is available to the broad British public as to the complexities of life on the ground in China, for Chinese—urban and rural, rich and poor, young and old.

  Few outside China are aware, for example, that individual ministries and provinces have active and adoptive responsibility for meeting needs in poor an disaster stricken areas with a degree of involvement beyond that experienced in western countries. Few outside China are aware of the high and rising levels of crime—particularly the abduction of women and children. These do not justify oppressive measures against individuals; they do however serve to provide a better understanding of context and a basis for building dialogue.

  The British business community recognises that there are enormous difficulties with China's human rights record. Equally, we are convinced of the importance of maintaining dialogue and of recognising progress as a means of encouraging further liberalisation. A National People's Congress with expanded (and largely self-asserted) influence; freedom for students to choose their careers; increased freedom of movement; the re-structuring and development of Chinese media with an increasingly questioning approach; unprecedented access to information through expanded voice and video communications and, in the urban areas, the Internet.

  It is beyond the scope of the present Memorandum to review all of the myriad policy issues relevant to the China-UK dialogue in any degree of depth (although we would be happy to bring together some of our members to provide a briefing if helpful); we have, however, thought it useful to highlight in Appendix 18 some of the challenges which we feel are not only most important for foreign business but which have a direct effect on the quality of life for Chinese nationals in China. While not justifying human rights infractions, the British business community feels strongly that any failure to take these challenges into account can only lead to a skewed, unproductive and quite possibly counter-productive dialogue on this important issue.


  Regional security is an important issue—and China sits at the vortex of many regional tensions. China is also a key entity in the search for solutions and British business is keenly aware of the growing political importance of the country within the region.

  Again, it is obvious that the strongest possible understanding of China's domestic perspectives provides the basis for the clearest and most productive dialogue. From the perspective of British business interests, a broad review of security issues in the Asia region would be likely to be of interest to major British business active in China and could be a focal point of attention for Wilton Park.

  Taiwan is the issue which most directly affects the broad community of British business interests. The issue is complex—and complicated by the fact that it has effectively been incorporated into the fabric of domestic US politics. Third countries can do much to provide a framework for dialogue. Conversely, timely and intelligent analysis is critical for the British business community on an issue which clearly affects long term business planning and also attracts such a high international profile.



  China continues to attract FDI but levels have dropped in recent years as the combined result of the Asian Crisis and of investor frustrations with transparency and market access; WTO access is seen by Zhu Rongji as a key factor in changing what might otherwise be a continuing downward trend—both in terms of changing perceptions and in terms of forcing through domestic reforms within government.

Trade levels

  Export levels are rebounding after a difficult period post Asian-Crisis; secure access to offshore markets is a key factor in driving WTO accession; ongoing tensions are unlikely to disappear however as China builds a highly aggressive export economy including a rise in the value added component (particularly in technology) and strong price advantage.


  Important not just for its terms of access for foreign goods but for its anticipated positive effect on levels of foreign investor confidence—and for its potential as a stick to force through some of the more difficult reform measures; much of the reform will (in the long term) be as good for Chinese industry as its western counterparts (including improving Chinese performance and providing a basis for Chinese investment offshore) but some areas are likely to provoke particular problems of adjustment—not least in agriculture (47.5 per cent of domestic labour in 1998; some 900 million individuals live in China's rural areas) where Chinese produce is largely uncompetitive and where jobs are most needed.

Central/Provincial Axes

  The relative power of local government waxes and wanes but overall China has a complex political system which requires considerable balancing of interests on the central/local divide—and which leads to enormous inter-provincial competition.

Coast and Hinterland

  Local differences are most apparent in the divide between the relatively prosperous southern and coastal areas (focus of reform and investment to date) and the hinterland (heavily dependent on Stated owned enterprise and vulnerable to shifts in the value of agricultural production). This differential is the source of the central government's most difficult policy challenges—and one which affects every aspect of political, social and economic life. A bid is underway to strengthen investment (domestic as well as foreign) in the hinterland with preferential policies and some funding. The Internet and e-commerce are seen as offering real value for the acceleration of growth in these areas as infrastructure is limited and investment in electronic communications over tangible infrastructure may make better sense.

Sino-US Relations

  Sino-US relations are an important factor (positive and negative) in domestic policy-making In this, it is important to appreciate that the US interfaces with China at many different levels—government to government (trade, security, human rights) and also business (not just US investment in China but Chinese investment in the US and—possibly more important for the long term—Chinese nationals who study and train in the US, start up US based businesses and bring them back to China (typical in the high tech/Internet area). The relationship is heavily nuanced and, although often, stormy, it is strong.

Social Stability

  The unevenness of economic reform and the rapidity and height with and to which urban incomes have risen has had a serious impact on social stability. Crime levels are rising and popular expressions of dissatisfaction are becoming increasingly common (viz. recent labour riots in Liaoyang and Chengdu). Reform objectives (supported not only by Zhu Rongji but also by foreign business and the international economic community) pose real challenges to employment. This issue is likely to dominate domestic policy for some years to come.

Health and Welfare

  Health and Welfare provision has historically come from employment in the state owned sector. Reform of SOEs requires the establishment of private care—and the creation of sufficient individual wealth to pay for it. In the interim, the linkage of health and welfare to paid employment gives a very sharp focus to individual aspirations and concerns.

Employment and Unemployment

  While China's growing private are absorbing labour, unemployment levels are thought to be higher than the official three per cent—with World Bank estimates putting the figure at 140 million "surplus labourers".

Media and Communications

  There are enormous changes underway in China's media and communications systems both in terms of structure and content. 91.6 per cent of the country's households have access to television—as opposed to only ten per cent with fixed telephone line access and 3.4 per cent with mobile; Internet users are estimated at 9.8 million, expected to rise to 22.5 million by end 2000. China's national broadcaster deployed the world's first global digital distribution network for television (1996, now reaching 98 per cent of the world). Responding to the challenge of Internet communications, China is now exploring measures to inject private sector energies into press and media, including the establishment of major media holdings. While censorship structures remain in place (directed as much towards pornography as to politics), delivery of attractive content (entertaining entertainment and informative information) is now part of a proactive policy of the central government.

Political plurality and conflict (within the CCP)

  While China effectively has only one national party—the Chinese Communist Party (CCP), it is a mistake to believe that plurality does not exist. There are significant differences of policy opinion within the CCP and within the State Council (the government of China). Understanding these differences, as well as the commonalities, is a critical aspect of reliable analysis.

Emergence of Balancing Weights—the NPC

  The National People's Congress has expanded its powers and working through a series of ad hoc groups is establishing the beginnings of countervailing policy thinking. Areas of particular focus for the NPC include environmental, education, venture capital, anti-corruption and the legal system.

CCP Search for Relevance: The Three Representations

  Against this background and in the face of enormous change on the ground (growth of the private sector, SOE reform, new entrepreneurial structures and the rigours of market discipline particularly in the labour market), the CCP is looking for contemporary appeal. Jiang Zemin has recently enunciated "three representations" which focus on actual delivery of economic and social well-being rather than ideology.

A Legal System only 20 Years

  China's modern legal system is only 20 years old. In that time, China has focused on cornerstones necessary to attract foreign investment and has laid down the foundations of a modern commercial law. In terms of approach and style, Chinese commercial law is far closer to the laws of continental Europe and the EU—with significant reliance on administrative interpretation. Domestic civil reform has been slower but some important milestones have been achieved, not least the Administrative Litigation Law. Much remains to be done—transparency will be a key focus in the post-WTO era, as will enforcement (particularly of IPR). In many areas, regulatory reform will actually require the expansion of regulation (reflecting a shift from administrative fiat). The result is likely to be a changing picture for some time to come. In this respect, there is a critical gap in human resources—China has less than 200,000 lawyers (as compared to New York State which boasts 67,000 alone)—a fraction of whom have international training.

Border Areas and Fundamentalism

  The Chinese population embraces 56 minorities with borders facing some of the most economically and politically challenged areas of Asia, including: North Korea, Former Soviet Republic, Mongolia, Iran, Pakistan, India, Bangladesh, Afghanistan, Sikkim; bordering Thailand, Vietnam and Laos, China's Yunnan Province also falls within the Golden Triangle. Muslin fundamentalism is not an active security issue but it is an area of long-term concern in Xinjiang.

War-lordism and Organised Crime

  There are certain effective limits to the authority of the State (central and local) in the less accessible parts of the country. At the same time, there are a number of organised criminal groups—from mainland operations of the Hong Kong based Triads to domestic equivalents.

Crimes Against Women and Children

  The abduction of women and children has become a serious issue in China. It is one which the government is committed to resolving but where resources are not necessarily equal to the task in hand. A domestic press report noted the rescue of 10,000 women and children during a major recent crackdown—if accurate, this figure indicates that the problem has achieved serious proportions.


  Corruption is a serious and recognised problem. Resolution in a rapidly growing economy with a considerable degree of decentralisation and in the midst of a process in which formal state control is being substituted by private enterprise, represents an enormous challenge. The government is dealing with the issue by identifying high profile cases and publicising heavy penalties (including the death sentence) on offenders—who in recent years have included a provincial vice-governor of Jiangsu as well as a range of other senior ranking officials.

Rise and Rapid Growth of the Private Sector

  The private sector already accounts for an estimated average 50 per cent of the domestic economy—and up to 80 per cent of local economies (such as the Pearl River Delta). Growth is now expanding to the industrial heartlands where private ownership is predicted to reach 40 per cent ownership by 2005. The private sector does however need substantial regulatory support if it is to develop and thrive and a number of regulatory and policy initiatives are underway.

Social Challenge of the SOEs

  As the traditional providers of health and pension welfare, the reform of SOEs represents a major social challenge whose impact is likely to be felt for some time to come.

Fragility of the Banking and Financial Systems

  While China escaped the worst of the Asian Crisis, there is widespread acknowledgement that the banking sector is troubled. As a series of reform initiatives seek to strengthen credit rating resources, cut exposure to SOEs and build a strong consumer credit industry, real question marks remain as to China's ability to avoid a banking crisis. Stock markets (less than ten years old) are limited in terms of the numbers of companies listed, ease of access and quality (and quantity) of information available to investors. Substantial investment will be required in these sectors if China's economic development is to be supported.

Continued Importance of Poverty Alleviation

  Using the World Bank standard (US$ 1 a day), some 100 million (less than eight per cent) people live below the poverty line in China today. This figure is a dramatic improvement over the position twenty years ago (one year after the Open Door Policy was introduced) when some 80 per cent of the population were estimated to live below the poverty line. Nonetheless, given high rates of growth in many parts of the country, the alleviation and extinction of poverty is high on the list of government policies.


  With single child families dominant in urban areas and with access to health and welfare increasingly dependent on access to work in a competitive labour market, education is critical. The Chinese education system is beginning the shift towards learner-based learning but in the interim and even accounting for limited access to higher education, the country already produces a high number of individuals with technical and English language skills (by the most conservative of estimates, at any given time over 100 million Chinese are learning English).

  Adult literacy is high at 81 per cent but less than three per cent of high school students (still 3.4 million) gain access to university each year. Of those who do reach university (and the government is working hard to increase access), some 40 per cent study some form of engineering. Nor is the State the sole provider of education; private educational services are proliferating as families (particularly urban families with only one child) seek to gain advantage for their children in what they know only too well is a highly competitive world. On-line education services are becoming increasingly popular: not only does China have on-line universities but Chinese nationals are signing up for a range of private on-line educational services (domestic and international) at all levels from high school to international MBAs.

Unprecedented Access to Information

  Measured by the growth in fixed and mobile line communications coupled with the rapid rise of Internet access, China's population is experiencing unprecedented access to information. Access is highest in the urban areas where central and municipal government commitment to cutting edge information and communications technologies is driving expansion. The rural areas are, however, not excluded. One of the key functions of the Hinterland initiative is to build strong communications infrastructure in the hinterland, mobilising a range of the possibility of preferential government policies and investments. In the interim, the Village-to-Village satellite broadcast network is bringing "TV to the TV-less" (the remaining seven per cent).

Infrastructure Challenges

  China's infrastructure needs major investment—both in tangible areas such as roads and in intangible areas such as law and administration. To give a snapshot example in tangible infrastructure: China has no national or provincial highway system—nearly 20 per cent of Chinese villages are unconnected by road.

  The challenge for the intangible infrastructure is even greater as China grapples with major institutional reform. The combination of a domestic policy decision to separating government from industry and likely WTO accession which will place a very heavy emphasis on performance in implementation. A wide range of laws will need to be revised to achieve transparency—and administrative practices, restructured accordingly. Given limited budgets and the scale of the challenge, prioritisation is likely to be inevitable.

Environmental Degradation

  China's environment faces serious challenges. While central government attention has risen (and NGO action has begun), the quality of the country's air and water are directly related to rates of mortality. The recent drought in Inner and Outer Mongolia has led to the loss of over 1 million head of livestock and provoked a rise in environmental migrants to China's major urban areas.


  70 million people in China still live without electricity.


  Notwithstanding strong government action, China's population continues to rise—most notably in the very (rural) areas which can at least support growth.

  Economic migration (internal as well as external) is likely to rise and to be a point of focus in domestic policy-making. China is preparing to see substantial growth in its urban areas but the commitment to the development of the hinterland is in large part driven by a desire to deflect migration.

Reconciliation of Asian and US Values (the 5th Amendment)

  Much is written about Asian and western values—and the differences between them. By and large, foreign business communities see more parallels than differences; there are however clearly differences of degree. This is most clear with regard to the relative importance placed on individual rights generally and with regard to freedom of speech in particular. In this latter respect, while western thought focuses on political freedom, China's embraces issues such as pornography. The enormous power of 21st century communications not only pushes these issues to the forefront, but also requires informed dialogue on both sides.



  The origins of the BCCC date from the establishment in 1981 of the informal Association of Representatives of British Companies with representative offices in China. In 1991 membership was expanded to include British business and professional expatriates who did not qualify for Company membership. In 1992 the ABCC membership voted for the ABCC to become a Chamber of Commerce and amendments were made to the Articles of Association in accordance with the Interim Provisions for the Regulations of Foreign Chambers of Commerce.


  Membership currently stands at 245, a number which has grown from a mere 42 in 1993, and covers the entire spectrum of British business interest in China. Ambitious targets are being set to increase further our membership, drawing on the rapidly developing IT market, and increasing numbers of Chinese nationals representing or working for British companies.


  The BCCC sees its role primarily to promote trade between Britain and China. It works closely with the British Embassy, CBBC and other organisations in pursuit of this aim. Of particular importance is the lobbying activity undertaken on behalf of members with the Chinese Government on matters of general and specific concern, and the input to the British Embassy of members' views on developments and trends in the political and business arena that impact on their activities.

  The Chamber also seeks to help and advise its Members, particularly those new to China on the intricacies of doing business here.

  It seeks also to provide links at senior level between the Chinese Government and UK business through the development of new and nurturing of long established relationships.

  The engine room for focussed activities lies in the sectoral sub-committees—eg financial services, telecommunications etc., which provide the impetus for full Chamber initiatives when required.

  General meetings and events are held at regular intervals—at least monthly and range from briefings and seminars to arranging events enabling visiting UK ministers and senior officials to meet with senior Chinese officials and Chamber members. A Chamber brief is usually supplied to the Embassy prior to UK Ministerial visits.

  Similarly briefing papers on relevant issues are supplied to Chinese senior officials visiting the UK.


  A quarterly newsletter is circulated to Members, and an annual Members' Directory is published, featuring all Members details throughout China and Hong Kong. Our latest and most exciting development, however, is the Chamber website ( We see this as becoming the major communication vehicle of the Chamber providing Members and anyone else connected with UK business with China a lively, topical and authoritative source of information, views and news. The directory of Members will also be held live on the site, and the intention is for it to become a fully interactive communications tool.


  Active contact is maintained with other countries' chambers and we participate strongly in the newly established (and awaiting Chinese approval) EU Chamber.

  Current Chinese legislation does not recognise the establishment of Chambers of Commerce anywhere but in Beijing. However there are British "Chambers" active in Guangzhou, Shanghai, Chengdu and Wuhan. The Beijing Chamber supports and liases closely with these offices and generally pleads their cause with central government for recognition—(the laws are in the process of being reviewed).


  As with most voluntary organisations the BCCC is dependent on its Members subscriptions for its financial viability. A grant from the DTI for two years was a welcome launch pad for our activity, but now we have to stand on our own feet. We are looking for creative ways to fund our future growth and maintenance of full Members' services.

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Prepared 29 November 2000