CHINA'S economy is booming, and last week’s trade mission saw the largest UK Government delegation attempt to strengthen ties with the country.
Business leaders agree there’s never been a better time to help rebuild Britain’s battered economy than by riding China’s second wave of prosperity.
The North-east is already topping the league of UK exporters to China, but how do more companies break into its markets?
China should not be seen as one country, according to Dr Zhengming Yang, UKTI’s North-east business development manager for China - it’s apparently far more complex than that.
“Central China is the focus in the next few years,” he claims, “coastal areas have been developing for the last 30 years. Now there’s Government incentives, a real push to help central China catch up.
“There are many markets. Regions have cultural and language differences. A single province can be larger than some EU countries. That’s why our team works so closely with regional and international trade advisors.
“It’s key for companies to go over there, establish contacts - know who they’re doing business with. And do their market research.”
Rolls Royce isn’t the only success story - Teesside firms that have been actively working with China for years have racked up a few of their own, particularly in the chemical and computer gaming sectors.
This year Wilton site owner, Sembcorp Industries, celebrated opening its first wastewater treatment plant in southern China and has pledged to expand its presence.
Fresh from a visit to the country by its key members, the NECC has just signed a Memorandum of Understanding with the North-eastern city of Harbin to develop working relationships.
“There is a massive opportunity for the North-east to export its skilled workforce and technology, particularly in the renewables sector,” said Jo Fryett, head of member relations at the NECC.
Dr Yang agrees.
“The UK in terms of research for solar and wind power is very advanced, China wants that technology, knowledge and learning but its advantage is the costs are much lower if products are made there.”
UKTI organises two themed trade missions a year - the next one in May, 2011, will focus on new and renewable energy - although visitors from other sectors are encouraged to go.
Other key growth areas, Dr Yang claims, include manufacturing, engineering, ICT and pharmaceuticals - and not forgetting the automotive supply chain.
But can firms compete with China’s lower cost base?
Absolutely, says Stan Higgins, chief executive of NEPIC, the North East Process Industry Cluster.
Just this month, NEPIC bosses have been on trade missions of their own to Nanjing, Shanghai and Hong Kong - alongside India and Brazil - to scope out the massive opportunities for the sector.
“The idea we’re losing business to China isn’t real,” said Dr Higgins. “The few businesses that did suffer have bounced back.
“Staff are commanding higher salaries in China - there’s an opportunity to sell into the country.
“China is building five new chemical plants at 180 by 100 miles each. There are huge opportunities for our companies to get in on the ground floor of these investments.
“It’s a massive selling job - SMEs need to be adventurous, get out there and let these markets know exactly what we’re capable of. We’re not doing that at the moment.
“Industry in China is no different to anywhere else, they reach a saturation point for home markets and have to globalise. They can do that on Teesside, and it’s a two-way thing.
“But,” he added, “our fear is that with the changes to the regional development agencies - in our case One North East, our abilities will be greatly reduced. Who is going to do that work?”
One North East says it has worked closely with Teesside organisations including NEPIC, CPI, Digital City and Teesside University, to promote opportunities for trade and investment in China.
A spokesman said: “Not only is China a market of great potential for exporters, there are currently 30 Chinese companies operational here in the North-east. In years to come China’s role in the global economy will become greater.”
Dr Yang added: “China is still maturing and pricing is sensitive, but UK brand names and Western goods are valued because they represent quality.
“But exporters should be cautious - UK companies need to protect brands and intellectual property. Products can be copied. Setting up long-term strategies, relationships with partners is the best route.”
And there’s no time like the present.
“China’s second economic wave is taking off, there are more Government incentives and more support and it coincides with the UK’s economic downturn,” added Dr Yang.
“In the next few years, two-way trade will greatly increase.”
Companies can contact UKTI’s China team hotline on 0845 05 05 054 or email firstname.lastname@example.org
Chinese business is booming for Darcham
TRADE with China is on the up for one Teesside company thanks to the East Asian country’s investment in nuclear power.
Graham Payne, managing director of Stillington-based Darchem Engineering, said their trade with China is booming. He said China is currently constructing between 10 and 15 new nuclear power stations, and they have secured a contract to supply over 50% with metallic insulation on the reactor pressure vessels.
He said between 20 and 30 of their 500 staff based at Stillington deal with Chinese contracts alone. However Mr Payne said trade with China still accounts for less than 5% of their overall business and Darchem are looking to increase this.
He said: “We are dominating the market and we have a lot more business opportunities moving forward both in China, because they are contin- uing their power station build, and around the world as the market expands. We have traditionally had elements of business with China but it’s probably grown in the last few years quite substan- tially because their need for electrical capacity has driven them to building nuclear power stations.”
He said Darchem has a “sizeable contract” with American company, Westing House, who have sold their nuclear technology into China and to whom they will supply reflective metallic insulation.
But Mr Payne urged Teesside business looking to expand to China to fiercely guard their products.
He said: “If you have got something that anybody else can easily copy you have got a major problem in going into a territory like that because they don’t have any intellectual property controls like they have in other parts of the western world.
Mr Payne said business people will also have to offer something really unique. He said: “I would say that maybe specialised engineering has a lot to gain. It’s a big growing market but it’s not necessarily easily accessible on every level.
“If you are providing a standard product you would be undermined and would waste time.”
Time to take advantage
ANDY Hatton, a partner at Billingham-based Global Anodes, said aspiring business people would be “missing an opportunity” not to take advantage of China’s appetite for western culture.
Global Anodes specialises in equipment, services and design consultancy for marine vessels, land-based steel and concrete structures, jetties, harbours and fixed offshore installations and 98% of its work is overseas.
Last year the three-year-old business picked up the New Exporter title at the North East Exporters Awards 2009 and completed its first contracts in China.
Mr Hatton said they are looking to expand further to China but have encountered problems, especially in manufacturing, as China’s Korean neighbours have been pricing competitors out of the market.
He said: “What we have seen supplying into the China ship building industry, certain elements are becoming dominated by Koreans.
“There’s always been this idea that China is the workshop to the world and China supplies everybody else but in this effort to drive down costs they have been buying in a lot of low cost, and in some cases low quality products from Korea.”
He said however that Teesside engineer firms have the “expertise” that are sought after in China. Mr Hatton said that during trips to China he has observed vast business opportunities that have arisen in the last decade - but Teessiders will have to pull out all the stops if they want to impress.
He said: “The Chinese are impressed by big showy things. You have just got to look at the opening ceremony of the Olympics, that’s what impresses and if you are going to be serious about making a trade representation to China we really need to use the sledge hammer to crack the walnut.
“If you have got the guts to get up and go out there you will find a market. It’s not easy by any means but the Chinese people are really hungry for foreign culture.
“You need to go over there and experience it. They love the English language, the whole thing, you have got an entire younger generation who want to eat with knives and forks - 10 years ago there was no such thing as a coffee shop in China but now you can’t move for them.
“There’s a lot of western culture moving in.
“There’s fresh bread shops and in China that was completely unheard of. They had no concept of sweet foods and now it’s one of the fastest growing markets over there.
“Art is another thing. There’s a huge interest in China in foreign artwork and there’s a great opportunity for artists here in Teesside to go and show their work.
“If you don’t do it you are missing an opportunity.”
North-East companies have grown their exports to China by around 30% compared with 2009.
The region has totted up £270m in exports to China in 2009.
In the first half of 2010 we have accounted for 5.31% of UK exports to China
Key export sectors are machinery and equipment, notably power generating machinery, electrical machinery and equipment, medicinal and pharmaceutical products and plastics
China is the second largest economy in the world in nominal US dollar terms. In 2009, China’s economy grew by 8.5%, the best per- formance of all the world’s major economies.
China is approximately the same size as the US, with a population of 1.3 billion. There were 122 cities in China with over one million people in 2008.
The UK ranks alongside Germany as the largest European investor in China (in cumulative terms), with at least 25% of the EU total. The total realised stock of UK investment in China reached US$16.9bn at the end of Aug 2010.
Chinese investment into the UK was $44m in 2009, 9.3% of total Chinese investment to EU. By the end of August 2010, Chinese investment into the UK by stock was US$1.13bn, and 400 Chinese firms are based in the UK.
China has the largest mobile phone market: over 833 million subscribers (as of September 2010) and the highest internet usage, 420 million users (as July 2010).
In 2008/9, there were 85,000 Chinese students in the UK.