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15 Oct 2008 : Column 262WH—continued

Attention has long been focused on China’s human rights record, pollution, its role in Africa and its challenge in other markets. Despite the image at the time of the
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Olympic torch, the prevailing image of China is of an economic powerhouse, as exemplified in Shanghai, and the nation that produced the most sensational and successful Olympic games. China has for some years been an attractor of foreign direct investment and is increasingly an outward investor. Of course, China is not standing alone. If one looks at the east, one is looking at India, Vietnam, the Asian dragons and tigers and the old economies of Korea and Japan. The sum of that is that the world is becoming oriental rather than occidental. It means that the economic centre of gravity is moving eastwards, and the political centre of gravity with it. That has profound implications for all that we do in relation to China.

China has been the pac-man effect in action, and becoming part of it has been an imperative and not an option. Whether the biggest challenge for us would be China’s continuing success and growth or its relative slowing-down and failure—not that one can look at it in those terms—has long been an interesting question.

As we saw in May, any reference to China as the workshop of the world simply fails to capture the incredible and rapid changes taking place within its borders and limits the nature of Sino-British partnership. We would be unwise to ignore, for example, the implications of a vast and growing Chinese middle class that would potentially consist of more than 500 million consumers by 2025. As we have said, British industry is very much aware of those opportunities. As science and technology take centre stage within the Chinese Government’s strategy for sustainable development, so a space has opened for expertise and experience in that area. Perhaps a prime example of that is Arup’s involvement in the Dongtan eco-city close to Shanghai.

The build-up to the Beijing games gave us many opportunities, and British firms were able to play a part in many sectors, such as the provision of temporary power for Olympic facilities, the design of the “Bird’s Nest” stadium, representing the British Olympics organising committee and the design of the magnificent terminal 3 building at Beijing airport. Those are but a few examples. It would be impossible in the time available to represent the range and diversity of opportunities and the successes that we have achieved in recent years.

Although we can celebrate the strength of the Sino-British economic partnership, we must be careful to avoid complacency. We are told that the UK is Europe’s largest investor in China, but we should be aware, echoing the point made by the hon. Member for Hertford and Stortford (Mr. Prisk), that in 2006 the net investment in China by British businesses fell compared with 2005. Furthermore, we should remember that that investment is dominated by a few companies, notably the oil companies. If we are to maintain an upward trajectory, and continue to capitalise on Chinese economic expansion, we must think about China with even greater interest and commitment than that which we have previously reserved for the US and Europe. Our trade deficit in Chinese goods, again reflecting the point made by the hon. Member for Hertford and Stortford, was £12 billion in 2006, and it continues to grow. At the same time, China was our 13th most important destination for goods, and 20th on the list for our services. That simply is not good enough when we consider that China is positioned to become the world’s largest economy within two decades.

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It is a courageous man who will speculate how China is affected by the current global economic crisis, and on present form it is not clear. On the latest statistics, our trade continues to grow, but it will certainly be affected, as will China’s growth—still between 9 and 10 per cent.—as it is hit by what is happening in the wider global economy. There is a minimum economic growth level that China must maintain in order to maintain social cohesion, given the absence of a sophisticated social security net, growing aspiration among the Chinese people and, notwithstanding the one-child-per-family policy, population growth. At this stage, while China sees economic turmoil as principally a western phenomenon, its exposure to problem assets cannot be assessed. Some factories are affected and some are closing. Basic production in steel, for example, is being cut.

China is making its contribution to a global solution and, like the west, is cutting interest rates. While having a relatively closed financial market, the Chinese economy will be affected. However, the supertanker effect—I am sorry to be so corny—is in play, as is the level of technological development, so the effect will probably be relative and China will remain in global terms an attractive place to do business. This is not a time to switch resources or attention from our business with China.

The second question I want to deal with, which has not been raised as much since stock markets started to rise again, is whether China will use its massive foreign exchange reserves and sovereign funds to buy up our assets at knock-down prices, and whether that would be a good thing. China has been an increasingly responsible global and regional player, both financially and politically. It played an extremely important leadership role in the Asian financial crisis and it will do so now. Thus far, to the best of my knowledge, it has used its sovereign funds in equity investment and in banks, which hon. Members might be surprised to learn, among other things. China also recognises its responsibilities and its lack of knowledge in running Western businesses. We have long sought Chinese investment and in the current climate we will want more. After all, it was a Chinese company that relaunched auto production at Longbridge.

The role of British business in China is crucial, but the Government are always central to achieving its aims, and the resources that they devote to this end must reflect both the scale of the challenge and the aspirations of industry. Our trade and investment team total 91 full-time equivalent staff in China to promote the interests of British goods and services there. That has increased by a quarter since 2005, which is obviously a step in the right direction.

I pay tribute to the China-Britain Business Council, which does excellent work in China for British companies, and to its current and past chairmen. As a nation, however, despite our task forces, prime ministerial and high-level visits, we still have not sufficiently moved on from an “us and them” relationship to one of greater partnership. We still treat China as if it was just another country, albeit an important one, but the fact is that the world has changed and we need to take account of that. We have not sufficiently changed our institutions or our attitudes to take account of the new global centre of gravity and the historic shift. We must do more.

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10.4 am

Mr. David Amess (Southend, West) (Con): I congratulate the hon. Member for Nuneaton (Mr. Olner) on securing the debate. As so many people wish to speak, I shall dump most of my speech and talk about suits, ties and watches on another occasion. I congratulate the Industry and Parliament Trust on this initiative. The hon. Gentleman is the chairman of the group, and the delegation was ably led by him and the hon. Member for Wirral, South (Ben Chapman). They did a splendid job, and I believe that every member of the delegation got something out of the trip.

We owe a debt of gratitude to the wonderful staff at the IPT, which is a wonderful organisation. I did my fellowship donkeys’ years ago with Esso, and am hoping to start a masters with Bank of America shortly. I understand that it will want to fly me to New York, so I am greatly looking forward to that. But as someone who had never been to China, the opportunity to go there changed my mind dramatically about a number of issues.

The chief executive of the IPT, Mrs. Sally Muggeridge, stated:

However, many of us need to go back. One visit to Shanghai hardly makes us experts, and I would like the opportunity to see a little more of the country.

Mr. Graham Allen (Nottingham, North) (Lab): One reason to go back would be to revisit PricewaterhouseCoopers, KPMG and several of the people whom we met there to discuss their analysis of the investments of the Chinese financial system, Bank of China and so on. Forgoing what appeared to be easy profits from investing in the wrong end of the American housing market and adopting a long-term and stable view of investments will pay off for them. Given the recent crisis, we could learn lessons from them.

Mr. Amess: The hon. Gentleman makes the point better than I would be able to, and I agree with everything he said. We are not making as much as we could of existing possibilities. Enforcement issues, consistent implementation of intellectual property rights, market access, red tape and subsidies to domestic companies all continue to feature among the barriers to doing business in the market. Such concerns need to be fully addressed in order to support UK exports and investments. We really could and should be doing better. My goodness, having visited Shanghai, I can understand why the Americans are slightly fearful of the competition.

I shall end with just a few remarks about the Essex-Jiangsu partnership. As all hon. Members know, Essex is the finest county in the country, and it always leads the way. The Essex-Jiangsu partnership has been running since 1988 and was formalised in 1992 by Lord Hanningfield, who just celebrated 10 years as a Member of the House of Lords. It was established with the
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overall goal of developing firm and long-term bonds with Jiangsu province and creating a harmonious relationship between Essex and China, and it has indeed done that.

The partnership aims to give practical support from the Jiangsu authorities to the county’s exporters, and to attract inward investment to Essex. The relationship has already produced great benefits for the county. In 2006, 30 businesses, including three Essex companies that have since set up operations in the province, were helped to find opportunities in Jiangsu.

Thirty-five Essex schools are actively engaged in curriculum links with Jiangsu schools, and a group of 12 primary and secondary schools has pioneered a successful drive to promote the teaching of Mandarin in Essex. Many teachers from Essex schools have already visited schools in Jiangsu and partnership links are developing.

The county council is aiming for the partnership to be recognised as the most productive relationship between a British local authority and a Chinese provincial government by 2010. Two years ahead of 2010, I am prepared to announce that it is the most successful relationship.

Essex county council is also holding a cultural festival to celebrate its 20-year partnership with Jiangsu province. Hundreds of celebratory events are taking place up to March 2009. This is a prime example of the kind of proactive, innovative approach to Chinese education and trade links needed in all parts of the UK and, as ever, Essex leads the way.

If we are talking about second languages in our schools, let us encourage Mandarin. It is a difficult language, and most of us have trouble speaking English, let alone a foreign language, but let us encourage people to speak Mandarin. As my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) said earlier, let us try to make the most of our opportunities.

I visited Shanghai zoo and I am determined that we secure a couple of pandas for London zoo—whether they will be leased or rented to us I do not know—and a couple for Colchester zoo.

This was a fun trip, but every member of the delegation would agree that it was worth while. I already had an image of China, but the trip changed my perception. What a wonderful country China is and what wonderful opportunities it provides for each and every one of us, particularly in these challenging times.

Mr. Eric Illsley (in the Chair): Before I call the next speaker, can I just remind hon. Members that the wind-ups must commence at 10.30 am?

10.11 am

Derek Wyatt (Sittingbourne and Sheppey) (Lab): I thank my hon. Friends the Members for Nuneaton and Shanghai (Mr. Olner) and for Wirral, South and Beijing (Ben Chapman) for the way that they masterfully looked after us in Shanghai. It was by some way the best trip I have ever been on. It was the best prepared trip—we had a number of seminars, language tuition and a marvellous pre-run before we got there.

Everyone has said “Well done” to the Industry and Parliament Trust and I commend it for its utter professionalism, which was outstanding. I, too, have
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done an IPT fellowship: mine was with Motorola 10 years ago. Motorola was the first company in America to be in China, 25 years ago. That was a hard call.

I was pleased to be in Shanghai, having been brought up in Hong Kong. It was good to see, in a sense, a second side of the Chinese face.

Some of the presentations that we received were outstanding. I still remember the BP presentation on intellectual property. The Chinese have struggled with that, but they are trying to get to grips with it, and BP is taking a global lead on that with them.

I share hon. Members’ reservations about whether we are really clued-in to what is going on in China. I ask the Minister to set up a China council on the same level as the National Economic Council on the credit crunch that we are considering at the moment, because I do not think that Departments understand what is going on. If the 19th century was the British century for the world and the 20th century was America’s, last week the 21st century became the Chinese century. China has $3 trillion of reserves, which is much more than the Federal Reserve has and certainly more than the Bank of England and Frankfurt have. This is the changing of the guard and we were lucky to just be on the edge of it in May and June.

A totally new approach is required. I shall try to illustrate that by looking at our Foreign Office representation. In China, we have one embassy and four consulates for a population of 1.3 billion. In India, we have one high commission, three deputy high commissions and three trade offices for a population of 1.2 billion. In America, we have one embassy and seven consulates for a population of 302 million. In Europe, we have 27 embassies and nine consulates general for a population of just under 500 million. That works out, in representation terms, as one embassy or consulate in China per 260 million people and, in India, one in 172 million. That is completely wrong.

We are so out of—I cannot think what the word is. We have misread the tea leaves about China and India at every level of Government in this country. We have done some good things in India—for example, we set up the UK India Business Council, and the UK-India education and research initiative to look at universities exchanging students and courses and trying to build relationships—but we have not done that in China.

I hope that out of this—although it is too early for the Minister to comment—comes the recognition that we need to have a proper all-engaging discussion about what we do about China. The events of the past two weeks have been so profound that I am not confident that we get it. That was one of the good things about going on the trip: not only was there terrific fellowship from all parties, but it was good fun and hard work and, because we were well prepared, we got so much more out of it than has been the case on previous visits.

One of many statistics given in a presentation threw me completely: 80 new cities of 5 million people each will be built in China over the next 10 years. That means 400 million new houses and other buildings, including schools and hospitals, as well as roads and goodness knows what. The demand for British product would be absolutely enormous, but where are we? We are behind Germany and France already.

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Mr. Hendrick: To echo my hon. Friend’s point, we visited Suzhou, which is an old town with a new city, probably the size of Birmingham, built alongside it over some 15 years. Suzhou makes Milton Keynes—our new city—seem like a village.

Derek Wyatt: I agree. At the same time that that city has been built, we have had the Thames Gateway proposals. I am at the edge of that at Sittingbourne and Sheppey, but I can tell hon. Members that we will still have the Thames Gateway in another 20 years and not much will have moved. A fundamental shift in thinking is required and China is leading the way, although it has borrowed, largely from Singapore. There are models out there that we can use, but for some reason we are becoming more isolationist in our thinking, which, in a global environment, unnerves me.

Those 80 new cities built over the next 10 years will, with a combined population of 400 million, have twice the population of Britain, France, Germany and Italy. We have to get our minds round the staggering economic change that is going to happen in China.

There were many highlights to the visit, but I should like to pay tribute to my favourite architect, I. M. Pei. We were privileged to see his new, beautifully designed, elegant, sensitive museum in Suzhou. He has done that while finishing the new cultural museum in Doha. I do not know where he finds the time: he is only 91. I sense that the museum in Suzhou will be his last ever commission. It was wonderful to meet his daughter and to spend time walking round the building. As somebody who loves architecture, I would not have missed it.

I want the Minister—although he may not be able to say anything about it now—to galvanise his Department to go to No. 10 and create a China council.

10.19 am

Mr. Mark Hendrick (Preston) (Lab/Co-op): I start, as my colleagues did, by paying tribute to the excellent work of the IPT. Sally Muggeridge and her team did a great deal to prepare us for this visit. I also thank the firms that sponsored the visit, including PricewaterhouseCoopers, Virgin and many others.

My interest in the visit came from two perspectives. First, my background before becoming a politician was in engineering and science, and seeing how China has developed industrially and technologically was of great interest to me. My other area of interest, which sparked my fascination with China, is education. My first visit to Shanghai just over two years ago was to two universities that were working closely with the university of Central Lancashire in my constituency.

The university of Central Lancashire has more than 1,000 students from mainland China, one of whom, I am sorry to say, sadly died last week in an accident when he was hit by a bus when on a bicycle in Preston. I send my condolences to that student’s family. Many students from China are in Preston studying at UCLan. Many are spending two years in China and one year in Preston to obtain a bachelor’s degree, and many are doing two plus two to obtain a master’s degree in a variety of subjects. Two and a half weeks ago, I was fortunate to attend the opening of the Confucius centre at the university of Central Lancashire in Preston with the Chinese vice-consul, who came from Manchester to attend the opening. My constituency and its university have many ties, and I have many interests.

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