Written evidence submitted by the China
Britain Business Council
1. INTRODUCTION
1.1 The China Britain Business Council (CBBC)
is the UK's leading agency set up to work with government and
the private sector to promote and help develop British business
with China. A short description of CBBC is attached to this memorandum
as Appendix 1.
CBBC offers these brief comments from a business
perspective on the growing economic prominence internationally
of the People's Republic of China (PRC) and on the role of the
United Kingdom and the European Union in the region.
2. THE IMPACT
OF CHINA'S
ECONOMIC GROWTH
ON THE
UK
2.1 China's rapid economic growth, since
its "opening up policy" began in 1978, makes it important
to the UK in a variety of ways.
2.2 First and foremost it is a market with
enormous potential, underlined by the recent upward re-evaluation
of the size of the Chinese economy, indicating a much larger service
sector that was previously reported. The UK is not performing
in the China market as strongly as it should. Various steps are
being taken up to rectify this, ie:
2.3 On the political plane, with effect
from 2003, annual summits now take place at Prime Ministerial
level, as has been the case for some time with the UK's main EU
competitor countries. In a country such as China this provides
vital endorsement for stronger business development and cooperation.
There is an intensified programme of ministerial
visits, many of which support business.
The work of the Deputy Prime Minister's China
Task Force has been extended to cover bilateral relationships
in healthcare/sustainable development/culture/sport and development
in Africa.
The Chancellor's Asia Task Force has been established
to consider the wider implications for UK business of Asian economic
growth, in which China plays a significant part.
China has reacted positively to these pro-active
initiatives. They create a broader and more stable relationship
and a positive environment for business. Business, including the
CBBC, actively supports and participates in them.
2.4 On the economic plane the UK Government
is responding by developing closer contact on international financial
issues through the Chancellor, by making more systematic use of
the Joint Economic and Trade Commission to identify areas for
closer cooperation, and by intensifying efforts to attract Chinese
investment into the UK.
Practical examples of this include:
— The City of London (particularly,
the current Lord Mayor, an experienced China hand) stepping up
its engagement with China. Via CBBC, the City has established
resources in Beijing and Shanghai to further cooperation between
the UK's financial sector and China.
— Government (UKTI), the Devolved Administrations
and the English Regions all taking steps to increase resources
and improve promotion to encourage Chinese companies to choose
the UK as their preferred destination for investment in the EU.
CBBC supports this activity in a variety of practical ways.
2.5 On the trade policy plane relevant UK
Government ministers/departments, as well as the CBBC, have intensified
bilateral lobbying of China to comply fully with its WTO obligations,
particularly on intellectual property protection and on the issue
of non-tariff barriers.
Government and CBBC (via its chairmanship of
the EU China Business Association) also cooperate closely with
the EU Commission's Trade Directorate on trade policy issues,
with the objective of further opening business opportunities for
UK companies in China.
2.6 Other UK organisations and representative
bodies (eg the Devolved Administrations, the English regions,
the CBI), have responded proactively to China's growing economic
influence by establishing closer links/offices in China. CBBC
cooperates with these bodies wherever possible to maximise resources
to the best advantage of UK business (eg joint offices in China—Manchester/CBBC
in Wuhan, Yorkshire Humber/CBBC in Hangzhou, Southampton/CBBC
in Qingdao, Essex/CBBC in Nanjing, and contiguous offices for
CBBC/the British Chamber of Commerce in China/Scottish Development
International/CBI in Beijing).
3. IMPACT OF
CHINA'S
GROWTH ON
THE DEVELOPMENT
OF TRADE
PROMOTION POLICY
3.1 In terms of business promotion and the
delivery of China business services, which is CBBC's remit, the
Council works closely with UKTI, other relevant government departments
and partners in taking the following steps with the objective
of helping to improve UK plc's performance in China.
3.2 As part of the work of the Deputy Prime
Minister's China Task Force, UKTI is working on a national strategy
for China. CBBC is contributing to this task.
3.3 In recognition of the rapidly increased
potential for UK business in China since the latter's accession
to WTO, CBBC has responded to market demand, assisted by the recommendations
made by the Deputy Prime Minister's China Task Force and with
the full support of UKTI, to extend its activities and capacity
to deliver services to greater numbers of companies across the
UK regions and in China in the following ways:
— In the UK, CBBC has combined with
regional partners to establish resources to deliver its services
to regional companies (particularly, to the growing number of
SMEs interested in exploring China market) at regional level.
Since 2004 CBBC has expanded its network of small UK offices from
two to five (London, Glasgow, Manchester, Leeds, East of England).
It is currently working with partners in the South West and East
Midlands to provide its resources in those regions with effect
from the beginning of the new financial year.
— In China, in order to provide a wider
and more comprehensive service to British companies across the
country, CBBC has expanded its network of offices in Chinese cities
from six to nine (Beijing, Shanghai, Qingdao, Shenyang, Wuhan,
Hangzhou, Nanjing, Chengdu and Shenzhen). Except in Beijing and
Shanghai, CBBC has located its offices in cities which do not
have British diplomatic posts (Chongqing, Guangzhou, Hong Kong)
to ensure that the British "commercial footprint" is
as wide as possible for the greater benefit of UK companies.
— In London and Beijing (CBBC's head
offices in UK and China), CBBC has upgraded facilities, installed
improved IT capacity and strengthened staff to accommodate increased
demand.
— To improve access to its services,
CBBC reformed its membership structure in 2004 to offer lower
subscriptions for small and medium sized companies and for individuals,
thus opening up CBBC's useful China business network to greater
numbers. By end of financial year 2005-06 CBBC membership, at
some 700, will be at a record level for the sixth year in succession.
3.4 To galvanise more UK companies into
exploring the China market, CBBC works with partners in the UK
to deliver China business information and training events for
UK companies across the country. Currently CBBC and UKTI are running
series of Greater China Roadshows which will cover all the English
regions. CBBC also runs its own more intensive China business
training programme (Take the China Challenge), which has so far
covered Scotland, North West, Yorkshire Humber and East of England.
The objective is, first, to stimulate greater
interest in the China market and, then, to provide as wide ranging
and as cost effective a selection of China business services as
possible to as many UK companies as can benefit from such support.
CBBC also works with government to fulfil a
number of specific business objectives, agreed with government
and set out in a Service Level Agreement with UKTI. Both UKTI
and CBBC have the overall aim of helping UK business achieve the
trade targets set by the UK and Chinese Prime Ministers. (Bilateral
visible trade of US$20 billion by end 2006 and US$40 billion by
2010)
In other words, although China's remarkable
economic growth presents the UK with continuing challenges, government,
CBBC and other major players have a clear strategy and a set of
structures for improving Britain's trade performance in the context
of a strengthened overall relationship with China.
4. ETHICAL ISSUES
FOR INTERNATIONAL
BUSINESS WITH
CHINA
4.1 China's growth is by no means problem
free. Challenges ahead include financial sector reform, the capacity
to cope with the environmental and social problems arising from
such rapid growth, as well as questions concerning the rule of
law and political change. In spite of the considerable progress
which China has so clearly made, it is undeniable that questions
of political and human freedoms and rights remain, which international
businesses in China should not ignore.
4.2 In some quarters there is a tendency
to assume that, because of China's growing political and economic
prominence in the world, international companies are prepared
to do business with China at any cost, ignoring questions of human
rights and the like. In fact there is much evidence to the contrary.
While it is true that the business potential offered by China's
economy cannot be ignored, it is CBBC's experience that responsible
international companies working in China conduct their business
as they would elsewhere in the world.
4.3 In assisting British companies doing
business in China, CBBC's policy is to advise that UK best practice
be adopted in any China operation. This is beneficial to both
China and UK business. We are confident that the majority of British
companies apply this advice.
4.4 Credit for much positive change in China
must be given to international business for the good influence
and example it is able to exert in labour practice, health and
safety, governance, and sound management. Concurrent with this
process is the fact that China has joined, and now participates
in, many world bodies (such as WTO), which in themselves exert
pressure for positive change. Such exposure to, and engagement
with, international business practice and systems is a powerful
incentive for China to move closer to world standards.
4.5 In addition to political dialogue conducted
by governments, the influence of international business is thus
positive. Responsible international investors in China have done
much to improve standards across many China business fields which
in turn have improved many personal freedoms in China. British
companies have made a significant contribution to this process.
4.6 While the CBBC is a business, not a
political, organisation, it has a vital interest in encouraging
the development of a proper, transparent business, legal and regulatory
environment in China. We will continue to cooperate with the relevant
departments of government, with the EU Commission and with British
business generally in pressing for such development.
5. OTHER IMPLICATIONS
OF CHINA'S
ECONOMIC GROWTH
FOR BRITISH
BUSINESS AND
THE ASIA
REGION
5.1 Business takes account of China's growing
regional role within various Asian institutions: ASEAN plus 3,
East Asia Summit, APEC. These should provide additional opportunities
for UK business to benefit from China's growth by investing in
other Asian countries supplying China or working with Asian companies
trading with China. The UK financial services sector is a good
example of how this can be done. We should not see China just
in terms of a bilateral trading relationship, but as an important
element in regional trade from which British business can benefit.
5.2 China is not only an opportunity, it
is also a challenge, as a low-cost manufacturer advancing steadily
up the technological curve, and as a competitor for markets as
well as for scarce commodities and raw materials. The lesson for
British business is the need to maintain and improve competitiveness
in every respect. This has implications for national and EU policies
on education and R&D, as well for the efficiency of UK companies
and their ability to produce the products and services which China
wants. Examples of support for such objectives include:
— The Research Councils' and the Higher
Education Council's recently announced intention to allocate increased
funding to selected UK universities' Chinese language and research
resources.
— The UK Government's British Year
of Science in China programme in 2005-06 promoting greater scientific
cooperation and publicising the UK's leadership in many different
scientific fields.
— CBBC's prioritisation of work on
UK innovation and technology as a means of helping smaller UK
high-tech companies into the China market.
5.3 On the UK and Europe's role in the region,
business values the EU's strong focus on trade policy issues in
relation to China where the EU Commission has proved a tough and
resourceful negotiator over WTO and in relation to barriers to
trade erected or maintained by the Chinese. The CBBC has been
able to play a supporting role in this through its chairmanship
of the EU China Business Association (EUCBA), in spite of policy
differences within Europe, eg the re-imposition of restrictions
on China's textile imports, which conflicted with a British business
preference for free trade.
Via its role in EUCBA, CBBC contributes to the
organisation of China business events at a European level, usually
in Brussels—a further example of the way in which CBBC works
with partners to promote information about China's market potential,
helping more companies into the China market.
6. CONCLUSION
6.1 Business wishes to see the UK have a
strong independent relationship with China based on engagement
over the whole spectrum of policy issues. We must make full use
of the UK's comparative advantages—for example, in the English
language, its education, its long regional experience and its
link with Hong Kong.
6.2 Although as already noted, the UK's
visible trade with China is lower than it should be, it is rising
and at a record level in 2005. It is likely that the UK's invisible
trade balance is in the UK's favour and will continue to grow
strongly as demand in China's service sector expands. The UK remains
the largest EU investor in China.
6.3 As indicated in the preceding sections,
this growing business relationship has been increasingly supported
by the development, over the past three to four years, of useful
and better coordinated initiatives in both the public and private
sectors. The CBBC is itself able to contribute to this process
because of its long experience of China business, its well established
and practical delivery mechanism, its ability to work with a wide
variety of UK partners, the strong support given to it by government
and the prestige it enjoys within the Chinese system as a long
standing friend of China and a supporter of a closer relationship.
But we must not rest on our laurels. China's development demands
that UK Government and business continue the process of working
creatively together to provide appropriate responses and support
for the UK's business relationship with China to prosper. In the
last few years the foundations for good progress have been laid.
They must be nurtured.
China Britain Business Council
January 2006
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