Leading Article: Heseltine turns sour to sweet

The thought of Michael Heseltine, hair aflap, pacing through the great halls of China must have been disconcerting to his hosts before he arrived this week. Could they expect a long lecture on the benefits of privatising the Chinese post office and selling off their nuclear power stations? Were dissidents hoping for a few lessons on how to oust an ageing leader?

In fact, the President of the Board of Trade was there to do business with the Chinese. Flanked by battalions from leading British companies, his task was to strike deals and impress the Chinese with all the goodies Britain could offer.

His mission marked a turning point in Sino-British relations. For more than a decade, as China has boomed, Britain has prevaricated. After the slaughter of Tiananmen Square in 1989, relations with Britain and other western nations turned sour. There were more than a few people who hoped and believed that the problem would be solved, as in eastern Europe, by a sudden and rapid collapse of Communist power. That has not happened.

Latterly, Sino-British relations have been further undermined by disagreements over the terms under which Hong Kong will revert to Chinese rule in 1997. Inevitably this has had an adverse effect on trade relations with Britain lagging behind the Americans and some European competitors in gaining a foothold in an economy that could, in the 21st century, be the largest in the world.

Mr Heseltine's trip represents an attempt to refocus Britain's relationship with China away from Hong Kong towards a more cordial bilateral partnership. It is a pragmatic stance recognising that the regime in Peking has proved more robust than some had predicted, bolstered by a growth rate that has become the envy of the world. As for Hong Kong, the handover will continue to poison relations in the short-term, but, as Chris Patten, Hong Kong's governor, has acknowledged, Britain now has a very limited capacity to influence the Crown colony's long-term status.

There will inevitably be continuing reservations about China. Some of the investors who have flocked there in recent years are, for example, voicing concern that a regime lacking political legitimacy may be unable to provide long-term stability for capital. They worry about whether there will be a smooth transition when Deng Xiaoping finally expires; they remember the turmoil when Mao's designated successor was ousted by Deng within two years of the chairman's death.

On a practical level, business people complain about the difficulties of making contracts stick in a state without the rule of law. And Chinese intransigence could still lead to a loss of confidence with Hong Kong itself.

Nevertheless, Mr Heseltine's welcome intervention is a sign that the Government is keen to make the best of relations with a country that cannot be ignored. The initiative is all the more significant from a Cabinet minister known for his pro-European leanings. Clearly, Mr Heseltine recognises that Asia Pacific, fuelled by Chinese growth, must also be given due emphasis by British government and business. Mr Heseltine was right to fly the flag. There is no reason to let unresolved disagreements destroy what could be a profitable relationship.