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16th – 19th May, 2011

The Duke of York visited Beijing, Chongqing and Chengdu from the 16th to the 19th May 2011


Picture: The Duke of York meets Premier Li Keqiang

With the Chinese economy continuing to grow at over 9% per year (as it has done for the past 30 years), the newly-launched 12th Five Year Plan, the important visit to the UK by Vice Premier Li Keqiang in January and the forthcoming Anglo-Chinese Summit planned in July, this was an advantageous time to visit China to discuss developing the important business relationship between China and the UK.

In Chongqing, one of only four Municipalities in China and run by the Party Secretary Bo Xilai (ex Minister of Commerce, and a potential future member of the Central Committee), The Duke of York was able to get a clearer idea of what is happening in the West of China and to understand the opportunities, and challenges, in a local economy which is growing at c.19% per year, and is undoubtedly the key city in the geographical centre of China. His Royal Highness met with members of the British business community, including GKN and Pilkington which have major investments into China, and it was emphasised that China is a market that cannot be ignored. It was clear that despite the difficulties, including the unreliable provision of energy in Chongqing itself, UK companies need to be engaged now, rather than in five years time, when it may be too late to reap the full extent of the benefits the region now has to offer.

In Chengdu, which His Royal Highness visited previously in November 2008, The Duke of York was able to reinforce the messages that the UK is interested in doing business in Western China, as well as on the East coast, with Mayor Ge Honglin whom he met on his last visit.

The underlying message evident throughout all discussions is that UK business cannot afford not to be engaged in China. With a population of 1.3 billion, a middle class numbered in hundreds of millions, a overall annual growth rate of 9% (closer to 20% in the West of China) and an aspiring society which is looking more to consumption, leisure and the protection provided by insurance, pensions and healthcare, there are numerous areas in which UK companies can thrive.

The key themes that came out of the visit were:

Areas of opportunity in the 12th Five Year Plan
State officials individually emphasised the importance of UK companies coming in to China to support the aspirations of the latest Five Year Plan. There is a need for further dialogue to match the areas identified for development with the products and services which the UK is best placed to export. Key identified areas are: insurance, financial services, pensions and healthcare.

“Partners for Growth”
Identified by the Chinese as an important phrase in the developing relationship with the UK. Being followed up in the July Anglo-Chinese Summit in London.

Complimentary economies
The UK is seen to be very strong in services. The development of the services sector in China is seen as a key to matching the aspirations of the middle classes, to tackle the issue of the ageing population and to support the shift from an export-led economy to one more focussed on the internal, Chinese customer. Healthcare, including equipment, drugs and know-how, is obvious as one area where they would welcome support. But, financial services, education, retail and others will all have important roles.

High End Manufacturing
The Chinese no longer wish to be a low-end manufacturing economy, and interlocutors made it clear in meetings that the companies and partnerships that they are most interested in will need to include value-added and technology transfer.

Management of the State’s financial reserves
It is clear that China will need advice, support and sophisticated financial instruments to enable these reserves to achieve a good return on capital invested. They are conscious that there will be a financial hole that will need to be filled, because of the ageing population. London is the obvious financial market to use to achieve their aims.

Opportunities for joint ventures in third countries
This is already happening with IOCs, but there is considerable scope in other sectors. Many of the State Owned Enterprises (SOEs) in China, which even 5 years ago appeared to be moribund, are now potential partners for joint ventures overseas.

The importance of Second and Third Tier Cities
Many cities outside the coastal strip have considerably greater growth potential in the next 5 to 10 years, and more opportunities for Foreign Direct Investment (FDI). British companies should not focus on the East coast cities alone.

Renewables and Sustainable Cities
This is a growing area of interest in China, illustrated by the Two Rivers New Zone in Chongqing. This is a sector in which the Chinese are clear that the UK takes a world lead, and they are actively looking for considerable support and assistance to fulfil their objectives.

Demographics
The ageing population, and their need to be able to support the extra demands this creates in the long term, provides particularly attractive opportunities in healthcare and pensions. This trend will also create a diminishing labour force in the medium to long term.

Level Playing Field
A phrase repeated by Vice Premier Li on three separate occasions during the meeting in the Great Hall of the People.The Chinese have a reputation for causing difficulties in administration, taxation and with intellectual property (IP). The Vice Premier acknowledged that this attitude will need to change, which is at least encouraging.

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