UK bids to woo the dragon

PEKING'S traffic police have been working overtime lately shepherding the motorcades of visiting dignitaries through the cramped streets. Goh Chok Tong, Singapore's Prime Minister; Lee Hong Koo, Prime Minister of South Korea; and Supachai Panitchpakdi, Thailand's deputy Prime Minister, have all passed through. The VIP congestion was made worse by the arrival of 800 business people for an international conference. Britain's delegation could get lost in the crowd.

Michael Heseltine, the President of the Board of Trade, arrived yesterday with 150 del- egates representing nearly 70 companies. It was billed as the largest UK trade delegation to China ever, and the first ministerial visit since Douglas Hurd, the Foreign Secretary, was there two years ago. As such, it signals another milestone in the gradual improvement in Sino- British relations, but UK businesses are still struggling in the competitive Chinese market.

The large number of foreign business people networking with China's cadres belies a more cautious attitude of foreign investors to China. According to Chinese forecasts, actual foreign investment is expected to fall from $33.6bn (£21.5bn) last year to $30bn this year, after a 40 per cent drop in pledged investment in 1994. Concern about persistent inflation, endemic corruption and the political succession in the post-Deng Xiaoping era have all contributed to a more circumspect approach after the investment frenzy of 1993. The bureaucratic difficulties of operating in China have also dampened early enthusiasm.

British companies are bucking the trend, however, despite Sino-British relations being overshadowed by the row over political reform in Hong Kong. If the statistics from the Ministry of Foreign Trade and Economic Co-operation (Moftec) are to be believed, at the end of 1993 Britain headed the league table of European investors, with promised investment of £3.1bn and actual investment of £578m.

Moftec's figures for last year are even more unexpected: actual UK investment in China was $690m, exceeding that of Germany ($260m), Italy ($200m), and France ($190m). UK companies are rather less impressive when it comes to exports, and Britain's trade deficit with China was nearly £800m last year. Provisional figures for the first three months of this year show no sign of improvement: exports were £194.2m, imports £402.8m. Thomas Chan, head of the China Business Centre at the Hong Kong Polytechnic, said: "Britain has some products for sale in China, but has not done so much work promoting those products."

Other experts think Britain's trade problems are more complicated. Cultural differences between China and the West are striking, and failure to learn how to do things in Peking can be critical. "There's a right way to do it and a wrong way," said Robert Young, managing director of Anderson Young and Associates, a business consultancy specialising in China. "The right way's cheaper."

In particular, the Chinese like to meet senior people face to face. British companies looking to set up joint ventures have little choice but to send executives to China to make contact. But many UK companies looking to sell into the Chinese market will send a junior sales rep. Or worse, according to Guo Hai Bin, chief representative of the China Council for the Promotion of International Trade in London, they try to do business by fax. "Some of those messages just get thrown in the garbage."

Political considerations may also have been a factor, particularly the row over reform in Hong Kong. Yet John Beyer, director of the China-Britain Trade Group, said his organisation had been unable to find any concrete evidence of deals falling through because of it.

The argument, which has been cooling as the handover in 1997 draws closer, may have influenced official statistics, especially Moftec's, which are considered to be less than totally reliable. British companies are shy about trumpeting deals, for fear a high profile will prompt political retribution. Power station contracts, in particular, often conceal UK involvement because the main players are French or American. On Tuesday, Babcock International will confirm it is close to signing a contract for $200m of boilers for power stations in Dandong and Dalian, awarded to Westinghouse.

Otherwise, apart from a £60m joint venture investment by Bass, the brewer, the raft of agreements to be signed on Tuesday in Peking makes unimpressive reading compared with the billions of dollars of contracts and agreements secured on recent US, French, German and Canadian trade missions.

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