Heseltine flies the trade flag in China

The clouds have lifted from British business, writes Teresa Poole
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The Independent Online
Peking - On the streets of Peking, much talk is of the Brits who are about to hit town. The English football team is due to play China next week at the city centre Workers' Stadium, and demand for tickets is high.

Meanwhile, unknown to most ordinary Chinese, a much larger team of British men is eager to take on China. Captained by none other than Michael Heseltine, the Deputy Prime Minister, the British trade mission will arrive in Peking today for a one-week tour of China.

It is being billed as the biggest-ever trade mission: about 280 British businessmen (and, according to the mission brochure, a grand total of two businesswomen) are on the aircraft, which will call at Peking and Shanghai before a final stop in Hong Kong next weekend. As one senior official said this week, the visit is supposed to be a "demonstration of UK plc".

The mission, which is the Mr Heseltine's only scheduled official foreign trip this year, is aimed at further cementing the improvement in Sino- British relations which began with his visit as President of the Board of Trade a year ago. With just 13 months before sovereignty reverts to China, questions concerning Hong Kong will top political discussions when he meets Chinese leaders.

The era when Sino-British disputes over political reform in Hong Kong clouded the picture for British businessmen in China are over, company representatives agree. Gordon Gurr, head of Rolls Royce in China, said: "The climate for British business in China now is better than it has ever been."

There are no major deals on the list of joint ventures and office openings that will be announced next week, but the British business presence has expanded rapidly over the past two years. Actual cumulative direct investment tripled between the end of 1993 and the end of 1995. In contrast, British exports to China fell 2.4 per cent last year.

But China remains one of the world's most difficult markets in which to do business, given the savage competition for contracts, the bureaucracy and government restrictions, and the corruption. China is securing the lowest prices possible from foreign firms eager to beat their rivals to deals. For most companies, profits are still a long way off but businesses have decided that they cannot afford not to be in China.

GPT, the telecommunications equipment manufacturer, has won a steady stream of contracts, including recent orders for 2,500 card-operated payphones. According to David Roberts, the company's chief representative in Peking: "I think everybody would say the same. I think it is the most competitive market in the world. It is very hard on price, but that is the nature of the market.

"I suppose if we were doing this business in other parts of the world, we would not do these contracts. But it is a strategic decision to be here."

Since Mr Heseltine's last visit, the performance of British business in China has continued to be mixed. The United Kingdom is by far the biggest European direct investor in China; in 1995 actual investment reached $914m, (pounds 609m) according to Chinese government figures. That brought UK cumulative actual investment in China to $2.2bn, more than triple the level it was at the end of 1993.

Sino-British trade presents a far less rosy picture. UK exports to China in 1995 fell 2.4 per cent to pounds 824m, while UK imports from China rose 18 per cent to pounds 1.94bn. The trade deficit is widening year by year. Among its European competitors, Germany, France and Italy all do better than Britain at exporting to China.

There are some striking successes, however. On the streets of Peking, Wall's is now one of the most visible foreign brandnames, just two years after it started ice-cream production in China. With Nestle's ice-creams about to move in, the focus is on securing a position in the market rather than going for short-term profits.

"We are expanding very fast. And clearly one tends to plough one's profits back," Robert Smith, the head of Wall's in China, said.