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British Business (China)

Thank you, Mr. Illsley. I start by warmly commending the hon. Member for Nuneaton (Mr. Olner) for securing the debate and for his excellent leadership of the trip, in conjunction with the hon. Member for Wirral, South (Ben Chapman). Perhaps I should confirm that I was a member of the delegation, although I suspect you will have gathered that, Mr. Illsley. As a trustee, I was impressed by the organisation provided by the IPT's staff and by the wonderful support and involvement given by the companies that sponsored and supported the trip. It was immensely helpful to have UK businesses alongside us while we were in Shanghai. I am aware that a good number of colleagues wish to contribute, so I shall move quickly through three broad points that I hope will add to the debate. First, reflecting on our trip to Shanghai from a little distance, I note that China is not a single market. In business and politics, we tend to talk in shorthand as though it were one large, homogenous market, perhaps because the Han ethnic group makes up about 90 per cent. of the population, or because Mandarin tends to be the language that most UK businesses or politicians encounter. There is an assumption that there is a homogenous whole, but if one looks carefully, one sees that the continent is just as diverse as Europe. Let us consider the north-south divide. In the south, cities such as Shanghai are fast moving and entrepreneurial. We saw that on our trip. Time and money matter there, as they do in many western cities. That is a crucial characteristic for such cities, and is one reason why Shanghai is the financial centre of China, although there may competition from Hong Kong in that regard. There is a cultural focus on entrepreneurship. However, when I talk to UK businesses, they tell me that their experiences in the north of the country—north of the Yangtze—are of a relatively slower and perhaps more bureaucratic way of dealing with business. That might be because Beijing, like Washington in the USA, is a corporate town and the corporation is government, making the culture somewhat different to that in Shanghai, Hong Kong or Shenzhen. It is important to understand that there is a difference between the areas to the north and south of the Yangtze. It is also important to remember, when thinking about whether China is a single market and at how businesses should approach it, the difference between the eastern seaboard and the rural hinterland. Roughly half of the 1.3 billion people in China live not in major urban centres or sprawling suburbs, but in the poorer and more remote towns and villages. We saw on our trip that there has been a huge migration of labour into the cities, with many such people working unofficially on construction sites. However, a substantial section of the population is not part of the economic revolution, perhaps because of their income level, location or age. From a business point of view, when thinking about the scale of that marketplace, it is worth remembering its characteristics and how it is differentiated. My second point is that China is not becoming a western nation, as might initially have appeared to be the case. It is simply becoming a modern nation. My first impressions of Shanghai were, I suspect, the same as those of most hon. Members present. It seemed remarkably like our western cities, with the shops and brand names, the people's adoption of western fashion, and even traffic jams. However, on talking to UK and local business people I realised that there are still vital differences to living and doing business there. I offer hon. Members a simple, but perhaps controversial, example. When we arrived at the hotel, a letter awaited us that set out the Government's rules and regulations governing use of the internet. I shall not test the patience of the House by giving all nine rules, but they included the following examples. When using the internet, one should not:"““Endanger China's unification of the country, territorial integrity and sovereignty… Betray China's national interests or endanger the security and honor of the country… Violate religious policy, publicize or promote any evil cult organisation… Spread rumors and disturb the social order and stability of the country””." Those rules might seem strange, but they are not simply the demands of a one-party state. The character of rules such as the one about the country's honour, suggests something very different to our social norms. As I suspect my hon. Friends will realise, I am no expert on the teachings of Confucius, but it seems to me that certain values that are distinctly different to our own remain central to the people of China. We believe in democracy and freedom of the individual, whereas they instinctively respect their rulers and always put family first. We believe in equality before the law, whereas they have far more regard for the quality of the ruler. Even with the upheaval of huge migration between rural and urban areas, there is still a strict hierarchy of relationships in China that shapes every family, business, community and political organisation. What we might perceive as subservience, they regard as respect. The paramount importance of face, or mianzi, matters greatly to every person, business and part of that nation. On my trips to Shanghai and to Hong Kong the previous year, I saw that things are changing. One interesting dynamic is what changes will come of the ““Little Emperor”” generation. Children grow up with considerable demands on them, but they also have considerable opportunity and might become more self-centred than their parents. If we look across the piece, British businesses that want to succeed in China will continue to need to understand the distinct values of that nation. My third point is that UK plc needs to do better. As I have said, I have been to both Hong Kong and Shanghai in the past 18 months, and I have been immensely impressed by many of the UK players whom I have met, such as the team at BP. I am sure that hon. Members will agree that they showed a long-term vision and professionalism that could match any competing company in the world. Other companies that are leading players, such as GKN and Arup, command immense respect in China. However, I fear that the overall effort of UK plc is not working as well as it might. Although our exports to China have grown, French exports have grown at twice the rate of ours, and German exports at three times the rate. In my discussions with businesses in Shanghai and subsequently, I have met several people who believe that the UK's official representation is not as effective as it should be. One of the problems is the unnecessary duplication of effort by Government agencies—the peculiarity of having different offices in different parts of Shanghai that often go to the same meetings and pitch for the same opportunities. The regional development agencies and UK Trade and Investment should not be jostling with each other for the same business. There should be one strong team working for the whole country, pooling resources and operating in each of the key cities. I would be particularly interested to hear the Minister's response to that point, given that the former Secretary of State for Business, Enterprise and Regulatory Reform made it clear, quite rightly, that he wanted to see that duplication ended. Equally, there is evidence to suggest that some of the original dynamism of the China-Britain Business Council has been lost and that British businesses and politicians are not getting in to see the right people in the Government at the right time. That problem was much commented on. I hope improvements have been made. If it can be demonstrated that things have changed, that would be fantastic; if it cannot, urgent work is needed. The opening up of China and the rapid expansion that that has created is a great opportunity for businesses in this country. We already have world-class players there—people who are regarded highly in China because they have taken the time to understand the markets and the people with whom they are working—yet UK plc is falling behind. Politicians in government and the business world generally need to realise that China is not a single market, but a continent of different cities and peoples and a truly segmented marketplace. We need to strengthen and unify our presence on the ground. Indeed, as the global economy turns down, we must become even more competitive. Our trip last May certainly helped me to understand the opportunity and challenges before us —I suspect that the same is true for other hon. Members—and I hope that it will inform Government policy in the coming months.