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UK to sell, invest more in smaller Chinese cities
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16:36, September 02, 2008

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British companies are encouraged to tap into the markets in second-tier cities in China while Chinese goods and money are welcome to the opportunities in the UK, including the 6 billion pounds of contracts for the 2012 London Olympics.

Those are the messages from Lord Digby Jones, Minister for Trade & Investment of Britain, from an exclusive interview with People's Daily Online during his recent visit to China concluding on August 26.

He said the 40 percent plus rapid growth of UK exports to China in the first five months of this year reflected a wealthier China's increasing demand for UK-produced high-end goods, such as Jaguar, Land Rover, and Bentley. China is a large buyer of Airbus. "Half of every single airbus is made in Britain: wings, engines," said Jones. And the Beijing Olympics brought about deals for power generation equipment.

More opportunities in the future --- either for trade or for investment --- will lie in second-tier cities in China. With 1.3 billion people, China has the largest domestic market in the world. European and American investors in China used to make to export --- building their manufacturing facilities in eastern coastal cities in China and exporting their stuff to Europe or America. Now they "make stuff in Chongqing and sell it in China," said Mr. Jones.

Mr. Jones took Wuhan, the capital city of Hubei province in central China, as a good example. A lot of British environmental specialist companies are operating there.

A latest research by UKTI has identified 35 Chinese cities --- smaller and less developed than Beijing, Shanghai, Guangzhou, Shenzhen --- as possibly the best British investment destinations in China in the future. SMEs in particular will find themselves much more important in those cities than in bigger ones. And people in western China will get richer and represent another good consumer market.

Another important reason for investors from the West to go out to China's west is the cheaper cost there. That means jobs can be retained in China.

However, the cost of transporting the stuff from the west inland to the outside market is a challenge. And cities there also need to do more to improve the investment environment.

Cheap labor used to be the most important reason for foreign investors to come to China. But this is no longer the case. "You come to China now for other reasons --- the ease of doing business, an educated workforce, logistics, transport." Mr. Jones stressed that China's biggest and best asset is its skilled, educated people. "That's the secret: continue training people."

Mr. Jones hopes that Chinese companies keep selling to Britain as well. The economic slowdown in the EU and the US, China's two largest trading partners, has weakened the purchasing power of consumers there. The UK's economy is facing the same problem. But Britain is "more open" and "Chinese goods are as welcome today as ever in Britain," said Jones. To achieve the established bilateral trade goal of 60 billion USD by 2010 means "China must keep selling to Britain as well."

Mr. Jones believes China's need for knowledge-based goods and services from the UK reflects the complementary nature of the two trading nations. "We would compete in third markets," he noted.

The knowledge-based competence of Chinese companies is also growing. Nobody heard of China Mobile and Huawei 20 years ago, but they are world-class companies now. Mr. Jones disclosed that China Mobile was "keen" on London Olympic contracts. Crystal Digital, which made the "scroll" for the opening ceremony of the Beijing Olympics, will tender for those contracts.

About 75,000 different contracts, worth about 6 billion pounds, for the London Olympics will be available to "every company in the entire world."

Mr. Jones affirmed that there was no protectionism in the UK in terms of trade and investment. Whereas Americans, the French, the Japanese and Germans are politically sensitive about China's sovereign wealth fund, the UK welcomes Chinese money.

The UKTI report shows that there were 59 Chinese investment projects in the UK in 2007, which meant 898 new jobs in the UK.

A joint economic and trade meeting at the senior minister level is expected to be held in Beijing on September 26. According to Mr. Jones, Secretary of State for Business, Enterprise and Regulatory Reform John Hutton will lead the British delegation. Mr. Jones released that his discussion with Chinese Vice Commerce Minister Yu Guangzhou during his trip this time has ben preparation for that meeting.

By People's Daily Online

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