APPENDIX 15
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.
II. THE FCO'S
WORK IN
CHINA
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. THE POLITICAL
WORK OF
THE EMBASSY
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. COMMERCIAL
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.
3. IMMIGRATION
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.
4. CONSULAR
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.
III. CURRENT
DEVELOPMENTS IN
CHINESE POLITICS
AND IMPACT
ON THE
BRITAIN-CHINA
RELATIONSHIP
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.
1. FOREIGN AND
SECURITY POLICY
RELATIONSHIP
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.
2. HUMAN RIGHTS
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.
3. REGIONAL SECURITY;
TAIWAN
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.
CHINESE POLICY CHALLENGES—SOME SNAPSHOTS
FOREIGN DIRECT
INVESTMENT (FDI)
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.
WTO
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
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.
Education
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.
Energy
70 million people in China still live without
electricity.
Population
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.
BCCC INFORMATION
1. ORIGINS
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.
2. MEMBERSHIP
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.
3. ACTIVITIES
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.
4. COMMUNICATIONS
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 (britaininchina.com).
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.
5. OTHER CHAMBERS
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).
6. FUNDING
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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