UK companies networking to lure investment from China

Local governments in Britain vie with each other to attract financing from the East, report Cecily Liu and Zhang Chunyan in London

On a snowy day in late March, a Chinese flag flew high outside the rural Welsh county of Flintshire's local government offices. Standing there to welcome their Chinese guests was a large group of locally respected figures and government officials, including a sheriff and a lord.

The special occasion marked the first visit to Flintshire by a group of representatives from the Chinese embassy in the United Kingdom. Determined to attract Chinese investment into the local economy, the Flintshire hosts proudly showed their guests the best of their local specialties, from castles and cheese to advanced manufacturing factories, offshore wind farms and an optoelectronics technology incubation center.

The scenes reflect that more regional governments in the UK are increasingly keen to build business relationships with China, as they realize that the central government's efforts are often more beneficial to the better known cities.

"I think we are very pragmatic in recognizing the economic challenges of the UK, and it's very important to recognize the importance of growing markets like China," said Aaron Shotton, leader of Flintshire County Council.

The Chinese delegation was led by Zhou Xiaoming, minister counselor for economic and commercial affairs at the Chinese embassy in the UK. Zhou said he has received several such invitations from local governments in the UK that are keen on attracting Chinese investment. He has visited a number of them, including Southampton, Leeds, Manchester, Birmingham and Chester to gain a better understanding of local opportunities available to Chinese companies.

One of the investment opportunities Shotton's team showed to Zhou was for Chinese companies to set up shop at the Deeside Enterprise Zone, an advanced manufacturing hub designated as one of five special areas for businesses to receive capital investment tax allowances in Wales last year.

The hub was formed in the early 1980s, when the Flintshire authorities implemented dramatic measures to attract inward investment after about 6,500 jobs in the county were lost during the collapse of Britain's coal and steel industries.

The redundancies in Flintshire created a surplus of a highly skilled manufacturing workers, which coupled with relatively cheap land costs and a welcoming local government successfully attracted investment from several multinational giants including Tata Steel, JCB, Airbus and Toyota.

For a county of 150,000, such an achievement is remarkable. But Shotton's team now envisages a "second phase" of inward investment with greater focus on emerging markets like China.

One motive behind this push is the hope that a government-to-government relationship may help local businesses that already have a China link to make new breakthroughs.

One such company is Flintshire-based SmartKem, a manufacturer of flexible and plastic electronic displays used in applications such as e-readers and smartphones. Having established a representative office in Hong Kong last year, SmartKem is currently in discussions with many potential Chinese customers. It plans to set up manufacturing capacity in China during its next stage of development, and hopes to find a suitable Chinese partner for the manufacturing.

Another example is EA Technology, which established a representative office in Shanghai in 2009 to sell monitoring devices that detect faults inside power generating machines. It now generates over $1.5 million of sales from China annually, with ambitions for much more, to make the best of China's large energy market.

Other companies in Flintshire are looking to work with Chinese companies in Europe. One example is Comtek Communications, a developer and manufacturer of specialty wireless communications equipment, which hopes to work with Chinese telecommunications companies like Huawei Technologies Co Ltd on network projects in Europe.

"It is so exciting to see Chinese telecommunications companies growing at such an incredible speed and winning so many contracts in Europe. We are very keen to provide them with specialist support services," said Askar Sheibani, chief executive of Comtek.

Sheibani said his sales team has already had frequent meetings with staff at Huawei's UK subsidiary, but no agreement has yet been reached.

"One challenge is the lack of access to the key decision makers at Huawei. And we are really hoping that the Chinese embassy can help us with this," Sheibani said.

Having heard the aspirations of Flintshire businesses like SmartKem, EA Technology and Comtek, Zhou said he is more than happy to help.

"I knew very little about Flintshire before my visit, but when I came here, I was pleasantly surprised to find the range of advanced manufacturing and technology businesses already operating here. I believe the potential for its cooperation with China is huge," Zhou said.

Even if Zhou had very little knowledge about Flintshire before his visit, it is easy to imagine that many Chinese investors may have never heard of the place, despite the wealth of opportunities the county offers.

This paradox highlights a challenge faced by many UK local governments for resource constraints, meaning they can hardly promote themselves overseas.

Indeed, the numbers tell the story. UK Trade and Investment, the central government arm responsible for attracting inward investment, had a total of 2,252 employees including trade advisers in 96 overseas markets as of March 2012. In comparison, Flintshire County Council's Regeneration team, responsible for economic growth, has only 25 employees.

But with UKTI organizing many events for Chinese businesses in London, where it is headquartered, regional governments like Flintshire County Council now feel increasingly compelled to promote local opportunities independently.

Though the council's meeting with the Chinese delegation was certainly a good start, Zhou feels there are more ways his team can help, including promoting communication and cooperation between enterprises on both sides, as well as helping exchange of delegations, providing them with information on how to exhibit products at trade fairs in China.

Flintshire is not alone in its endeavor to build the China link. Many British local governments have established extensive cooperation links with China, resulting from years or decades of work.

One example is Essex, a county northeast of London, which signed a friendship agreement with Jiangsu province in 1992, and has since worked with Jiangsu extensively in trade, investment, education and culture.

"When we first met to explore opportunities, we realized that the two areas have common features and aspirations. Both regions have a large port with abundant logistics facilities, and both champion the development of offshore wind technology," said Peter Manning, head of international trade at Essex County Council.

In 1994, formal trade delegation visits between the two areas began on a regular basis. In recent years, two Jiangsu companies, Jiangsu Sainty Bancom Wood and Phoenix Publishing and Media Group, established offices in Essex. Several Essex companies have also established offices in Jiangsu, Manning said.

To support businesses on the ground, the Jiangsu provincial government and Essex County Council have exchanged a member of staff to work at each other's offices.

Cooperation in cultural and educational fields has also boomed, with exchanges of students between schools. The Jiangsu provincial government also regularly sends groups - 60 Chinese teachers at a time - to Essex to teach Mandarin and learn valuable lessons about a Western education system.

Last year, Essex county council helped the Colchester Castle Museum host a temporary exhibition of Chinese artifacts belonging to Nanjing Museum, which created a significant boost for tourism in the local area.

Twinning with a Chinese province or city has become a popular method for UK local governments to quickly develop targeted links with China. Examples include Sunderland with Harbin, Sheffield with Chengdu, and Nottingham with Ningbo.

In addition, local businesses and academic institutions also play a key role in helping local governments attract inward investment, offering valuable market knowledge and contacts.

One example is the University of Nottingham, which is doing research and development to help the Chinese automotive producer Changan Automobile Group Co Ltd upgrade its technology. This cooperation has led Changan to establish an R&D center in Nottingham, creating more than 60 jobs.

The University of Nottingham's Asia Business Center is working closely with Nottingham City Council to draft the council's China engagement strategy, said a council spokesman.

But the UK's local governments do not just work hard to attract Chinese investors, they do much more to help Chinese businesses to grow and prosper in the UK.

"We are keen for investors to grow, because that would create local jobs and drive the local economy," said Andrew Finney, councilor on Basingstoke and Deane Borough Council, whose team has helped the Chinese telecommunications company Huawei extensively over the years.

When Huawei moved its UK headquarters from London to Basingstoke in 2003, Finney's team helped Huawei find a suitable office, accommodation for employees, and a location for a company canteen.

As most UK schools require students to register in advance due to capacity restraints, Finney's team worked especially hard with local schools to create extra capacity to accommodate the children of Huawei employees. His team also made Huawei a member of its local business forum, which hosts meetings for businesses to discuss the growth strategy of the local area.

"Huawei has become an integral part of our community," Finney said, adding that witnessing Huawei's headquarters team grow from only 150 employees in 2003 to 400 now is particularly rewarding.

Finney adds that Huawei's contributions to Basingstoke go beyond direct economic results. "Firstly, as Huawei is one of the major Chinese investors in the UK, we can use Huawei as a promotional case study to attract more investment," he said.

"Secondly, the Chinese children made a great contribution to our local schools, because they demonstrated to some of our children that hard work does pay results."

As Huawei expanded rapidly in the UK, it had to look for larger office space. After realizing the difficulty of finding this in Basingstoke, Huawei announced that it would move its headquarters to Reading, later this year.

Finney said the news is unfortunate, but emphasizes that as the council is constructing a new business complex, called Basing View Business Park, he hopes there will be future opportunities to attract Chinese investment.

"Huawei needed a building now, so Basing View's development was not quick enough to meet their needs, but the experience we have gained working with Huawei is invaluable and will come into use when we work with other Chinese investors in the future," Finney said.

Contact the writers at cecily.liu@chinadaily.com.cn and zhangchunyan@chinadaily.com.cn