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British run to catch up in race for China trade

Doing business with China can be difficult, but it also throws up unexpected opportunities.

Britain's best-known manufacturer of earth-movers, JCB, recently sold 12 machines to China's national railway. The Chinese railway wanted them for building houses - in Botswana.

Another British firm is now poised for a marketing challenge. Lyons Tetley expects to be selling its (round) tea-bags to the discriminating tea-drinkers of the Middle Kingdom.

This is not the usual image of British business in China, as the UK has an annual trade deficit with China of £800m. Both the Sino- British row over Hong Kong and the lack of foresight of British business have been blamed. So the visit of Michael Heseltine, President of the Board of Trade, and more than 140 British businessmen on the largest British trade mission to any country is seen as highly significant.

As the first Cabinet-level visit since July 1993, Mr Heseltine's arrival at the weekend suggests relations are thawing. Last autumn, Peking could not agree on a date for a visit by the Trade Minister Richard Needham. Today, Mr Heseltine is to meet Li Peng, China's Prime Minister. Whether this can help to resolve differences over Hong Kong is a moot point. People in the colony are concerned that China's most senior official for Hong Kong affairs, Lu Ping, refuses to meet the Governor, Chris Patten, or the Chief Secretary, Anson Chan. A stand-off continues over arrangements for the colony's Court of Final Appeal, and over preparations for the hand-over of sovereignty in 1997. Mr Heseltine has said he "might" raise Hong Kong in official meetings this week.

There is more reason to be hopeful about British exports than settling disputes over Hong Kong. It is difficult to establish how well British companies are doing in China. British trade statistics show the UK lagging behind European competitors, such as Germany, France and Italy, when it comes to exports to China. But Chinese figures, which are not trustworthy, show Britain is more active than other EU countries in making direct investment in China. British officials cannot explain these divergent trends.

The poor state of Sino-British relations since 1992 may have contributed to a failure to win big infrastructure contracts. But firms chasing smaller orders do not have that excuse.

One mainland Chinese employee of an English manufacturing company on the trade mission said: "British companies came here a little bit late compared with the Japanese and Americans."

Many companies represented on Mr Heseltine's trade mission admit they have been slow off the mark. But they say they woke up to China's potential about two years ago.

JCB had been selling one or two vehicles a year to China for a long time. "We decided a couple of years ago that we needed to be much more active in China," said Mike Chapman, its Far East director. JCB hired a mainland representative last October. It predicts sales of vehicles to China and Hong Kong will more than triple this year.

Bridon of Doncaster had been supplying steel cables to Chinese mines for a decade before deciding, two years ago, to give serious attention to China.

"We obviously missed a couple of opportunities. But since we decided to do something about the Chinese market we have been running fast to catch up," said George Armitage, the director for Asia-Pacific. Bridon subsequently won a $5m (£ 3.1m) contract to supply the wire for the main suspension cable across the Yangtze at the site of the Three Gorges dam.

Similar stories are told by other companies, including Thorn Lighting, which recently lit the new Xidan shopping centre in Peking and Zhuhai's airport. Satchwell Control Systems of Slough opened an office in Peking six months ago, and immediately took orders for environmental control systems. In three years', said its managing director, Angus Cairns, China will provide "a serious chunk of business for us".

British exports may be on the rise, but no one disputes that China is a difficult market for foreign businessmen, and not only because of bureaucracy. Goh Chok Tong, Prime Minister of Singapore, the fifth largest investor in China, warned: "The rule of law is not consistently applied ... Businessmen complain about the lack of transparency in the way rules are made and applied ... When things go wrong, recourse to the legal system is limited."