Conclusions and recommendations
The UK's trade relationship with China
1. We
welcome the Government's focus on China as a key export market
for the United Kingdom. We also welcome the fact that the Government
has resisted the temptation to develop a brand new strategy for
engagement with China but, instead, has refined the previous Government's
strategy to take account of new economic realities. (Paragraph
15)
2. There is now a
close match between a number of economic priorities in China's
latest 5-year plan and UK expertise in professional services,
finance, information technology and design amongst others. If
the UK does not react quickly to these opportunities, China will
look elsewhere and a golden opportunity to deliver a step change
to our volume of trade with China will be lost. It is vital that
the Department and UKTI has a clear strategy for those sectors
and that it is put in place as a matter of urgency. (Paragraph
20)
3. The size of the
task facing both the Department and UKTI is clearly seen by the
fact that Germany continues to out-perform the UK in trade with
China. The agreement between the UK and China to increase bilateral
trade to $100 billion by 2015 pales in comparison to the German
target of $284 billion over the same period. Given the fact that
this will be in the period in which UK should have an economic
advantage, this is deeply worrying. (Paragraph 23)
4. Our Report on Trade
and Investment recommended that UKTI considers how it can encourage
larger companies to bring their supply chain with them when they
enter foreign markets. Our experience in China was that this would
greatly benefit SMEs entering the Chinese market. Mentoring of
SMEs by major UK companies, and a greater dissemination of their
experience of doing business were suggested to us by SMEs in China.
We recommend that UKTI incorporate these suggestions in their
strategy to better inform UK SMEs of the opportunities and benefits
of exporting to China. (Paragraph 28)
Government support for UK businesses
5. We
welcome the increase in the number of FCO staff working in China.
It is clear that the size of the China market, and the UK's modest
success in exploiting it, merits further resources. Given the
considerable cuts being made elsewhere—as noted in our Trade
and Investment Report—the FCO and UKTI in China will need
to demonstrate that these resources have been put to good use.
Increases in activity will not be sufficient; UKTI will need to
justify this increase in staff with evidence of their role in
increased UK exports to China, and increased inward investment
from China. (Paragraph 35)
6. We welcome the
partnership between UKTI and the China-Britain Business Council
as a cost-effective way of providing a greater range and reach
of support to UK companies, both in the UK and in China. We recommend
that Government consider how this approach to delivering services
can be replicated in other key markets. (Paragraph 37)
7. In our report on
Trade and Investment we highlight the importance of trade shows
and recommended that UKTI provide detail on how the Trade Show
Access Programme will be enhanced in 2012 with potentially less
funding. We now recommend that in its Response to this Report
it sets out details of how the Trade Show Access Programme in
China will be sustained and enhanced over the coming years. (Paragraph
43)
8. We congratulate
the work of UKTI at the Shanghai Expo and the success of the UK
Pavilion. The levels of activity were impressive but these inputs
will count for little if they do not deliver tangible business
results. The success of the UK Pavilion will be judged on outcomes
and we ask the Government provide us evidence that those high
levels of activity are now being turned into additional business
for UK companies. (Paragraph 47)
9. Inward investment
from China is important to the UK economy and we welcome the commitment
by the Prime Minister and the Chinese Premier to increase bilateral
trade. The example of Shanghai Automotive's long-term commitment
to MG, the local economy and job creation is a model of the benefits
of attracting inward investment. The potential to expand production
at Longbridge highlights the success of Shanghai Automotive's
investment and its value to the UK. This commitment has to be
matched by the Government. (Paragraph 50)
10. With limited resources
available for trade support, the Government needs to prove that
it can attract many more companies with a similar desire to invest
in the UK. We appreciate that there is a balance to be struck
between support for UK exports to China and support for Chinese
investment into the UK. Therefore, the limited resources available
to UKTI makes getting the balance right ever more important.
(Paragraph 51)
Strengthening Relationships
11. We
welcome last year's trade delegation to China, led by the Prime
Minister. It was a demonstrable success with tangible outcomes
for business. However, it should not be seen as a one-off event,
but the start of an extended series of political and economic
visits. The development of the China/UK relationship will depend
on regular contact between the political elites of both countries.
We believe that it is in the UK's economic interest to make that
visit an annual event. (Paragraph 59)
12. We agree with
the China-Britain Business Council that a much enhanced understanding
of China today amongst the British business community is needed
if we are to achieve a step-change in the level of our exports
to China. Equally, we agree that this is also necessary to present
the UK as premier destination for Chinese investment. We look
to the Government to provide us with details on how it, and the
China-Britain Business Council will use the recent bilateral visits
to better publicise the positive benefits of our relationship
with China. (Paragraph 64)
The Visa regime
13. An
efficient and accessible visa regime is vital if the Government
is to demonstrate that the UK is open for business. A key message
we brought back from China was that businesses and universities—both
British and Chinese—faced severe difficulties in obtaining
UK visas for their employees and students. Ministers appear to
be unaware of the seriousness of the situation and their account
and their characterisation of our experience as a "temporary
phenomenon" smacks of complacency. When it responds to this
Report, the Government has to set out in detail how it will address
its lack of awareness of these concerns and how it will rectify
both the problems and perceptions of the visa regime in China.
We caution the Government that monitoring of the system will
not be enough, it needs firm action now. (Paragraph 71)
Intellectual Property
14. We
acknowledge that China takes seriously the need to address both
the problems and perception intellectual property theft and that
the UK Government is actively working with the Chinese Government
to find as solution. The importance of resolving the problems
of IP theft cannot be underestimated. If it is not resolved,
UK companies which are IP-intensive will not have the confidence
to enter the Chinese Market. That would undermine the UK's ability
to increase its share of the China market. We will expect from
the Government a clear route-map to solving this issue. Furthermore,
we ask the Government to set out what support it will provide
in the meantime so that IP intensive companies will have the confidence
to trade in China. (Paragraph 80)
Conclusion
15. The
Chinese market offers the potential for the UK to deliver significant
improvements in its export performance. The latest 5-year plan
for the Chinese economy offers the UK a window of opportunity
to deliver a step-change in its trade relationship with China.
The speed with which the Chinese economy is developing means that
it will not be open for long. It is therefore vital that the Government
acts now to ensure that UK companies can realise the potential
of the China market. (Paragraph 81)
16. The Government has clearly targeted China as a key part of its strategy to increase the UK's trade and exports. However, despite hearing that the Chinese economy is now playing to the UK's strengths we continue to be out-performed by countries like Germany. The recent announcement of $100 billion target for UK/China bilateral trade was quickly overshadowed by the German target of $284 billion. The contrast between the two should serve as a wake-up call for the Government.
(Paragraph 82)
17. The UK is playing catch-up in its trade relationship with China. If the UK is to realise its potential in this key market, the Government, as a matter of urgency, will need to up its game.
(Paragraph 83)
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