MARKET ESSENTIALS - China

China

SECOND EDITION

Market Essentials “China is emphatically not a static giant. It is a fast evolving colossus. Trade and investment prospects between the UK and China have never been better.�

Sir William Ehrman, KCMG British Ambassador to China

China

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 33

USEFUL CONTACTS

Offices in the UK and China

www.cbbc.org

UK OFFICES CBBC (HEAD OFFICE) 1 Warwick Row London SW1E 5ER Tel: 020 7802 2000 Fax: 020 7802 2029 Email: enquiries@cbbc.org Web: www.cbbc.org

CBBC NORTH WEST International Trade Centre Churchgate House 56 Oxford Street Manchester M60 7HJ Tel: 0161 237 4090 Fax: 0161 236 1341 Contact: Claire Robinson Email: claire.robinson@cbbc.org

CBBC YORKSHIRE & HUMBER Leeds Chamber of Commerce & Industry 102 Wellington Street Leeds LS1 4LT Tel: 0113 247 1584 Fax: 0113 247 1111 Contact: Giles Blackburne Email: giles.blackburne@cbbc.org

CBBC EAST OF ENGLAND Tel: 01787 310245 Contact: Chris Cotton Email: chris.cotton@cbbc.org

CBBC SCOTLAND 1st Floor 30 George Square Glasgow G2 1EQ Tel. 0141 204 8353/8322 Fax: 0141 204 8354 Email: scotland@cbbc.org

CHINA OFFICES CBBC SHANGHAI Unit 1701-2 Westgate Tower 1038 Nanjing Road W Shanghai 200041 Tel: +86 21 6218 5183 Fax: +86 21 6218 5193 Contact: Fu Yue Email: shanghai@cbbc.org.cn

CBBC BEIJING The British Centre Room 1001 China Life Tower 16 Chaoyangmenwai Avenue Beijing 100020 Tel: +86 10 8525 1111 Fax: +86 10 8525 1001 Contact: Michael Wang Email: beijing@cbbc.org.cn

CBBC CHENGDU 1705B, 17/F, Block A Times Plaza, No 2, Zongfu Road Chengdu 610016 Tel: +86 28 8665 6302 Fax: +86 28 8665 7296 Contact: Sophie Bao Email: chengdu@cbbc.org.cn

CBBC NANJING Room 2514-2515 50 Zhong Hua Road Nanjing 210001 Tel: +86 25 5231 1740 Fax: +86 25 5223 3773 Contact: Dereck Wang Email: nanjing@cbbc.org.cn

CBBC WUHAN Room 1203, Tower New World International Trade Centre 568 Jianshe Avenue Wuhan 430022 Tel: +86 27 8577 0989 Fax: +86 27 8577 0991 Contact: James Lui Email: wuhan@cbbc.org.cn

CBBC SHENZHEN Room 1121 Tower A International Chamber of Commerce Building Fuhua Yi Lu Futian District Shenzhen 518048 Tel: +86 755 8219 8148 Fax: +86 755 8219 3159 Contact: Thomas Qiu Email: shenzhen@cbbc.org.cn

CBBC QINGDAO Room 503 5th Floor 121 Yan An San Road Qingdao 266071 Tel: +86 532 8386 9772 Fax: +86 532 8386 9329 Contact: Jiang Haofang Email: qingdao@cbbc.org.cn

CBBC HANGZHOU A-809 Zhejiang World Trade Centre 122 Shuguang Road Hangzhou Zheijiang 310007 Tel: +86 571 8763 1069 Fax: +86 571 8763 0961 Contact: John Zhou Email: hangzhou@cbbc.org.cn

CBBC SHENYANG Room 901 Tower 2 Shenyang City Plaza 206 Nanjing North Street Heping District Shenyang 110001 Tel: +86 24 2334 1600 Fax: +86 24 2334 1858 Contact: Lisa Liu Email: shenyang@cbbc.org.cn

INTRODUCTION

USEFUL CONTACTS

Foreword by the British Ambassador to China Globalisation has been pulling China rapidly into the world. Britain’s interests in China have grown commensurately. We now have extensive bilateral links in every major field.

China has been our fastest growing market for the past seven years. In 2006, total two-way trade in goods totalled US$30.7 billion, a 25.2% increase over 2005.

As the largest EU investor in China, the UK had over 5,359 projects in China by the end of 2006 with a realised value of US$13.9 billion. Our export of services rose 54% over the two years of 2004 and 2005. In return, Chinese investment in the UK is increasing rapidly.

We look forward with great pleasure to being actively involved in the two major global events China will be hosting over the next few years: the Beijing 2008 Olympics and the 2010 Expo in Shanghai, and to continued rapid bilateral expansion in trade and investment in the years to come.

Sir William Ehrman, KCMG

Over 300 mainland Chinese companies have now invested there. More and more Chinese companies are also listing on the London Stock Exchange: the numbers on the Alternative Investment Market (AIM) rose from 21 to 51 in 2006.

China has been the UK's fastest growing market for the past seven years. In 2006, total two-way trade in goods totalled US$30.7 billion, a 25.2% increase over 2005.

Introduction by the Chinese Ambassador to the UK China and Britain have maintained robust economic and trade relations in recent years. There is, however, considerable potential for further cooperation in a number of fields, including energy, environmental protection, bio-technology, information and new materials.

In 2006, bilateral trade exceeded US$30 billion, a thirtyfold increase on trade levels twenty-five years ago.

Britain continues to be the largest EU investor in China and is its third largest overall trading partner. The deepening of economic ties between the two countries has brought tremendous opportunities for further trade and investment.

Madam Fu Ying

But there is no room for complacency. China and the UK are the fourth and fifth largest economies in the world.

Bilateral trade, however, accounts for less than 2% of China's total and 3.5% of the UK's total, so there is much room for improvement. In terms of investment, the UK is number one in China among European countries, but is leading Germany by only US$500 million and on an annual basis, the UK has been behind Germany for the last three years. China and the UK must therefore continue to work hard to translate opportunities into realities.

Where, then, should UK businesses focus if they are to succeed in China? The following are some indications: first, environmentally-friendly projects. All Chinese provinces are under pressure to upgrade technology and to replace old infrastructure, so there is the

BRITISH EMBASSY 11 Guanghua Lu, Jian Guo Men Wai Beijing 100600, China Tel: +86 10 5192 4000 Fax: +86 10 6532 1937/8/9 Email: commercialmail.beijing@fco.gov.uk Web: www.uk.cn

BRITISH CONSULATE-GENERAL Suite 301, Shanghai Centre 1376 Nanjing Xi Lu Shanghai 200040, China Tel: +86 21 6279 7650 Fax: +86 21 6279 7388 Email: commercial.shanghai@fco.gov.uk Web: www.uk.cn

UK TRADE & INVESTMENT China Unit, Kingsgate House 66-74 Victoria Street, London, SW1E 6SW Tel: 020 7215 8000 Contact: Mushtaq Bux Email: mushtaq.bux@uktradeinvest.gov.uk Web: www.uktradeinvest.gov.uk

BRITISH CONSULATE-GENERAL Commercial Section 7th Floor, Guangdong International Hotel 339 Huanshi Dong Lu Guangzhou 510098, China Tel: +86 20 8314 3000 Fax: +86 20 8333 6485 E-mail: guangzhou.commercial@fco.gov.uk

BRITISH CONSULATE-GENERAL 28/F, Metropolitan Tower 68 Zourong Road Central District Chongqing 400010, China Tel: +86 23 6369 1500 Fax: +86 23 6369 1525 Email: chongqing.consular@fco.gov.uk

EMBASSY OF THE PEOPLE’S REPUBLIC OF CHINA Economic and Commercial Counsellor's Office Cleveland Court, 1-3 Leinster Gardens London, W2 6DP Tel: 020 7262 0253 Email: press@chinese-embassy.org.uk Web: www.moftec.gov.cn

BRITISH CONSULATE-GENERAL (PO Box 528) No. 1 Supreme Court Road Central Hong Kong Tel: +852 2901 3000 Fax: +852 2901 3066 Email: commercial@britishconsulate.org.hk Web: www.britishconsulate.org.hk

BRITISH TRADE AND CULTURAL OFFICE 8-10 Floor Fu Key Building 99 Jen Ai Road, Section 2 Taipei, 100, Taiwan Tel: +886 2 2192 7000 Fax: +886 2 2394 8673 Email: info@btco.org.tw Website: www.btco.org.tw

THE BRITISH CHAMBER OF COMMERCE, BEIJING The British Centre Room 1001, China Life Tower 16 Chaoyangmenwai Avenue Beijing 100020, China Tel: +86 10 8525 1111 Fax: +86 10 8525 1100 Email: admin@pek.bricham.org Web: www.pek.britcham.org

THE BRITISH CHAMBER OF COMMERCE, SHANGHAI Unit 1703 Westgate Tower 1038 Nanjing Xi Lu Shanghai 200041, China Tel: +86 21 6218 5022 Fax: +86 21 6218 5066 Email: admin@sha.britcham.org Web: www.sha.britcham.org

THE BRITISH CHAMBER OF COMMERCE, GUANGDONG 1206, 17/F Guangdong International Hotel 339 Huanshi Dong Lu Guangzhou 510098, China Tel: +86 20 8331 5013 Fax: +86 20 8331 5016 Email: manager@britchamgd.com Web: www.britchamgd.com

THE BRITISH CHAMBER OF COMMERCE, CHENGDU Room L 7/F Sichuan International Building 206 Shuncheng Avenue, Chengdu Sichuan 610015, China Tel: +86 28 8652 1700 Fax: +86 28 8652 1056 Email: cbbccd@mail.sc.cninfo.net

THE BRITISH CHAMBER OF COMMERCE, WUHAN Room 611 International Trade & Commerce Centre 566 Jianshe Avenue Wuhan 430022, China Tel: +86 27 8577 0989 Fax: +86 27 8577 0991 Email: wahan@cbbc.org.cn

BRITISH CHAMBER OF COMMERCE, HONG KONG Room 1201 Emperor Group Centre, 288 Hennessy Road Wanchai, Hong Kong Tel: +852 2824 2211 Fax: +852 2824 1333 Email: info@britcham.com Web: www.britcham.com

THE BRITISH CHAMBER OF COMMERCE, TAIPEI Suite 805, 8th Floor, 207 Dun Hua North Road, Taipei 105, Taiwan Tel: +886 2 2547 1199 Fax: +886 2 2547 2378 Email: info@bcctaipei.com Website www.bcctaipei.com

expectation of considerable growth in coming years.

Second, in China's western and central regions investment can qualify for preferential tax treatment and qualification is relatively flexible. Third, the old industrial heartlands in the Northeast of the country, with strong manufacturing, raw material processing and agricultural sectors, need significant investment to facilitate technological modernisation. Fourth, the service industry, especially in logistics, operations, skills and training. Outsourcing is increasingly popular due to its efficiency saving and employment creating potential. There is also growing interest among Chinese enterprises in investing overseas and I believe the UK is well placed to take advantage of this.

Economic globalisation is growing at such a pace that market information is constantly changing. It is therefore both necessary and timely for InterTrade Media to update this Market Essentials folder on China. This second edition is a welcome and positive step towards helping businesses in both countries to develop their strengths, realise their potential and help take economic relations between China and Britain to a new high.

© October 2007 - InterTrade Media Limited. All rights reserved.

Photos courtesy of: Dreamstime.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of InterTrade Media Limited. The views expressed in this publication are not necessarily those of the promoters involved. Whilst every effort has been made to ensure that the information in this publication is accurate, InterTrade Media Limited cannot accept any liability for loss or damage arising from facts, errors or omissions. Readers should undertake the usual commercial checks before entering into business arrangements.

InterTrade Media Limited UK, Tel: + 44 161 613 5872, Fax: + 44 161 333 5353, E-mail: info@intertrademedia.com

INTRODUCTION

USEFUL CONTACTS

Foreword by the British Ambassador to China Globalisation has been pulling China rapidly into the world. Britain’s interests in China have grown commensurately. We now have extensive bilateral links in every major field.

China has been our fastest growing market for the past seven years. In 2006, total two-way trade in goods totalled US$30.7 billion, a 25.2% increase over 2005.

As the largest EU investor in China, the UK had over 5,359 projects in China by the end of 2006 with a realised value of US$13.9 billion. Our export of services rose 54% over the two years of 2004 and 2005. In return, Chinese investment in the UK is increasing rapidly.

We look forward with great pleasure to being actively involved in the two major global events China will be hosting over the next few years: the Beijing 2008 Olympics and the 2010 Expo in Shanghai, and to continued rapid bilateral expansion in trade and investment in the years to come.

Sir William Ehrman, KCMG

Over 300 mainland Chinese companies have now invested there. More and more Chinese companies are also listing on the London Stock Exchange: the numbers on the Alternative Investment Market (AIM) rose from 21 to 51 in 2006.

China has been the UK's fastest growing market for the past seven years. In 2006, total two-way trade in goods totalled US$30.7 billion, a 25.2% increase over 2005.

Introduction by the Chinese Ambassador to the UK China and Britain have maintained robust economic and trade relations in recent years. There is, however, considerable potential for further cooperation in a number of fields, including energy, environmental protection, bio-technology, information and new materials.

In 2006, bilateral trade exceeded US$30 billion, a thirtyfold increase on trade levels twenty-five years ago.

Britain continues to be the largest EU investor in China and is its third largest overall trading partner. The deepening of economic ties between the two countries has brought tremendous opportunities for further trade and investment.

Madam Fu Ying

But there is no room for complacency. China and the UK are the fourth and fifth largest economies in the world.

Bilateral trade, however, accounts for less than 2% of China's total and 3.5% of the UK's total, so there is much room for improvement. In terms of investment, the UK is number one in China among European countries, but is leading Germany by only US$500 million and on an annual basis, the UK has been behind Germany for the last three years. China and the UK must therefore continue to work hard to translate opportunities into realities.

Where, then, should UK businesses focus if they are to succeed in China? The following are some indications: first, environmentally-friendly projects. All Chinese provinces are under pressure to upgrade technology and to replace old infrastructure, so there is the

BRITISH EMBASSY 11 Guanghua Lu, Jian Guo Men Wai Beijing 100600, China Tel: +86 10 5192 4000 Fax: +86 10 6532 1937/8/9 Email: commercialmail.beijing@fco.gov.uk Web: www.uk.cn

BRITISH CONSULATE-GENERAL Suite 301, Shanghai Centre 1376 Nanjing Xi Lu Shanghai 200040, China Tel: +86 21 6279 7650 Fax: +86 21 6279 7388 Email: commercial.shanghai@fco.gov.uk Web: www.uk.cn

UK TRADE & INVESTMENT China Unit, Kingsgate House 66-74 Victoria Street, London, SW1E 6SW Tel: 020 7215 8000 Contact: Mushtaq Bux Email: mushtaq.bux@uktradeinvest.gov.uk Web: www.uktradeinvest.gov.uk

BRITISH CONSULATE-GENERAL Commercial Section 7th Floor, Guangdong International Hotel 339 Huanshi Dong Lu Guangzhou 510098, China Tel: +86 20 8314 3000 Fax: +86 20 8333 6485 E-mail: guangzhou.commercial@fco.gov.uk

BRITISH CONSULATE-GENERAL 28/F, Metropolitan Tower 68 Zourong Road Central District Chongqing 400010, China Tel: +86 23 6369 1500 Fax: +86 23 6369 1525 Email: chongqing.consular@fco.gov.uk

EMBASSY OF THE PEOPLE’S REPUBLIC OF CHINA Economic and Commercial Counsellor's Office Cleveland Court, 1-3 Leinster Gardens London, W2 6DP Tel: 020 7262 0253 Email: press@chinese-embassy.org.uk Web: www.moftec.gov.cn

BRITISH CONSULATE-GENERAL (PO Box 528) No. 1 Supreme Court Road Central Hong Kong Tel: +852 2901 3000 Fax: +852 2901 3066 Email: commercial@britishconsulate.org.hk Web: www.britishconsulate.org.hk

BRITISH TRADE AND CULTURAL OFFICE 8-10 Floor Fu Key Building 99 Jen Ai Road, Section 2 Taipei, 100, Taiwan Tel: +886 2 2192 7000 Fax: +886 2 2394 8673 Email: info@btco.org.tw Website: www.btco.org.tw

THE BRITISH CHAMBER OF COMMERCE, BEIJING The British Centre Room 1001, China Life Tower 16 Chaoyangmenwai Avenue Beijing 100020, China Tel: +86 10 8525 1111 Fax: +86 10 8525 1100 Email: admin@pek.bricham.org Web: www.pek.britcham.org

THE BRITISH CHAMBER OF COMMERCE, SHANGHAI Unit 1703 Westgate Tower 1038 Nanjing Xi Lu Shanghai 200041, China Tel: +86 21 6218 5022 Fax: +86 21 6218 5066 Email: admin@sha.britcham.org Web: www.sha.britcham.org

THE BRITISH CHAMBER OF COMMERCE, GUANGDONG 1206, 17/F Guangdong International Hotel 339 Huanshi Dong Lu Guangzhou 510098, China Tel: +86 20 8331 5013 Fax: +86 20 8331 5016 Email: manager@britchamgd.com Web: www.britchamgd.com

THE BRITISH CHAMBER OF COMMERCE, CHENGDU Room L 7/F Sichuan International Building 206 Shuncheng Avenue, Chengdu Sichuan 610015, China Tel: +86 28 8652 1700 Fax: +86 28 8652 1056 Email: cbbccd@mail.sc.cninfo.net

THE BRITISH CHAMBER OF COMMERCE, WUHAN Room 611 International Trade & Commerce Centre 566 Jianshe Avenue Wuhan 430022, China Tel: +86 27 8577 0989 Fax: +86 27 8577 0991 Email: wahan@cbbc.org.cn

BRITISH CHAMBER OF COMMERCE, HONG KONG Room 1201 Emperor Group Centre, 288 Hennessy Road Wanchai, Hong Kong Tel: +852 2824 2211 Fax: +852 2824 1333 Email: info@britcham.com Web: www.britcham.com

THE BRITISH CHAMBER OF COMMERCE, TAIPEI Suite 805, 8th Floor, 207 Dun Hua North Road, Taipei 105, Taiwan Tel: +886 2 2547 1199 Fax: +886 2 2547 2378 Email: info@bcctaipei.com Website www.bcctaipei.com

expectation of considerable growth in coming years.

Second, in China's western and central regions investment can qualify for preferential tax treatment and qualification is relatively flexible. Third, the old industrial heartlands in the Northeast of the country, with strong manufacturing, raw material processing and agricultural sectors, need significant investment to facilitate technological modernisation. Fourth, the service industry, especially in logistics, operations, skills and training. Outsourcing is increasingly popular due to its efficiency saving and employment creating potential. There is also growing interest among Chinese enterprises in investing overseas and I believe the UK is well placed to take advantage of this.

Economic globalisation is growing at such a pace that market information is constantly changing. It is therefore both necessary and timely for InterTrade Media to update this Market Essentials folder on China. This second edition is a welcome and positive step towards helping businesses in both countries to develop their strengths, realise their potential and help take economic relations between China and Britain to a new high.

© October 2007 - InterTrade Media Limited. All rights reserved.

Photos courtesy of: Dreamstime.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of InterTrade Media Limited. The views expressed in this publication are not necessarily those of the promoters involved. Whilst every effort has been made to ensure that the information in this publication is accurate, InterTrade Media Limited cannot accept any liability for loss or damage arising from facts, errors or omissions. Readers should undertake the usual commercial checks before entering into business arrangements.

InterTrade Media Limited UK, Tel: + 44 161 613 5872, Fax: + 44 161 333 5353, E-mail: info@intertrademedia.com

China

SECOND EDITION

Market Essentials “China is emphatically not a static giant. It is a fast evolving colossus. Trade and investment prospects between the UK and China have never been better.�

Sir William Ehrman, KCMG British Ambassador to China

China

China 2nd Edition Inserts 07

13/5/08

12:39 pm

Page 2

INTRODUCTION

Welcome Message by the Chairman of the British Chamber of Commerce in China China's remarkable transformation into one of the strongest global economies continues at a breathtaking pace. It is exhilarating to be involved at the heart of this and it is particularly encouraging to see the UK taking a leading role. The UK's engagement in China over the last 12 months has been stronger than ever, as evidenced by direct UK exports to China which totalled over £3.3bn in 2006 alone and over 25 high-level UK visits to China in 2006. Allied to the fact that the UK remains the EU's largest investor in China, this engagement is testimony to the important role the UK and UK business has in China's growth.

Michael Fosh

However, British, international and Chinese businesses alike face a new challenge in their operating environment: that of climate change and its implications for business. For its part, the UK Government sees China as a key country for the implementation of technologies that will slow the growth in the atmospheric concentration of greenhouse gases, and at the same time contribute to the country's development.

BCCC is a vital source of information for those setting up in China and for "old hands". Through working closely with the British Embassy and UK Trade & Investment, the CBI, the British Council, other international chambers and local organisations, the BCCC helps to ensure that British businesses are given the best chance of grasping the opportunities available in China's fast-moving business world.

In this area and key business sectors, the British Chamber of Commerce in China (BCCC) is uniquely positioned to provide British member companies with essential information and contacts in this dynamic and exciting marketplace. Central to our mission is connectivity and networking both between members, which in Greater China now number over 2,000 and outwardly to local business and other institutions. With a rich pool of on-the-ground experience from members ranging from some of the largest MNCs to small and medium-sized enterprises, as well as individuals, the

As trade relations between the UK and China continue to strengthen, the British Chamber of Commerce in China looks forward to working with its partners and Chinese counterparts to play a leading role in this vibrant business environment.

The Chamber serves as the independent voice of British business in China and provides connectivity and a valuable business network for British companies in this challenging, transitional market.

Climate change is now widely recognised as the greatest global problem facing mankind and this is reflected in China's 11th 5-year plan, which encourages high-technology and energy-efficient production.

Comment by the Chief Executive of the China Britain Business Council In the past year, China has made an ever greater impact on the world stage – and that is coming on top of an economic transformation that is unprecedented and truly remarkable. Continuing to grow at more than 10% a year, China is underpinning the growth of the world economy. The country has the biggest foreign exchange reserves in the world, now standing at over a trillion dollars, some of which the country now aims to invest in funds and companies not just in China but internationally.

The US$3 billion stake that China has taken in the private equity company, Blackstone, is really just the start. Such is the size of the market in China that no company with an international dimension to their business can afford to ignore it.

Stephen Phillips

Of particular interest for UK businesses is that China’s economy is being shaped by entrepreneurial dynamism and market capitalism, and increasingly by the private sector. Dealing with like-minded entrepreneurs should make doing business more familiar for companies developing their businesses in the China market. But, at the same time, the market has become fiercely competitive. To succeed, business needs to research the market thoroughly but be prepared to take risks; to rely on commercial and entrepreneurial instinct, but take advice from experts; to operate according to their own principles, but to take due account of Chinese culture and practices. There is no doubt that China is a challenging market, but the opportunities for British businesses have never been better.

The China-Britain Business Council (CBBC) exists to help British businesses to succeed in China. Our mission is to deliver a comprehensive range of firstr a te, practical, value-for-money China business services to support British companies – and especially

small and medium-sized companies – to enter the China market. CBBC works closely with UK Trade & Investment and, since 1st June 2007, delivers the f o l l owing services on their behalf: • providing market research under the Overseas Market Introduction Service (OMIS) and answering enquiries about the market • supporting British companies on trade missions to China and at trade fairs • using our expertise in event management to deliver seminars and other events.

CBBC also uses its extensive and long-standing links with Chinese authorities at national, provincial and municipal levels including Chinese partners such as the Ministry of Commerce and the China Council for the Promotion of International Trade in support of UK business interests.

We look forward to hearing from British companies: we are here to help.

China 2nd Edition Inserts 07

13/5/08

12:39 pm

Page 3

INTRODUCTION

Welcome Message by the Chief Executive of Asia House in London Asia House is delighted to be contributing to this Market Essentials folder on China.

Asia House is the premier pan-Asian organisation in the UK. Based in London, we are a non-profit, nonpolitical organisation established in 1997 and are celebrating our 10th anniversary this year. Our focus is on fostering links with the Asian business, cultural and diplomatic communities, promoting in the UK a greater understanding of the rich and varied Asian cultures and economies. Our new headquarters building was opened in October 2005 and in our first year of operation we executed over 125 events for 30 Asian countries with audiences in excess of 35,000.

Charlotte Pinder

Our definition of Asia stretches from Iran in the west to Japan in the east, and from the central Asian republics in the north to Indonesia in the south. We act as a forum for the exchange of ideas and knowledge, providing a bridge for cultural and business links and promoting understanding of the increasing importance of Asian economies within the global system.

Our corporate programme offers our corporate members exclusive access to meetings with visiting Asian government and business leaders and experts on Asian affairs. Such meetings provide inv a l u a b l e opportunities to learn at first hand about government policies and market conditions in Asia, and to exchange views on mutual topics of interest.

Asia House works in close association with the Chinese Embassy in London, as well as the British Embassy in China. We have recently been honoured by a visit from Madam Fu Ying, the Chinese Ambassador to the UK, where she met with senior UK business leaders over luncheon.

This Market Essentials folder is an informative , accessible guide to the sectors, industries and commercial opportunities in this hugely important and exciting country.

The five-star red flag of the People’s Republic of China was officially adopted in 1949 on the day the Republic was founded.

The red field uses a colour associated with both China and revolution. The large gold star in the canton represents the Common Programme of the Communist Party, while the four smaller stars symbolise the social classes it unites: workers, peasants, petty bourgeois and capitalists sympathetic to the Party. Collectively, the five stars symbolise the people’s unity under the Communist Party.

Introduction by the Director General of the Confederation of British Industry I made my first visit to China as Director General in March 2007 and was struck not by only the vast changes to the country since my last visit but also by the sophistication with which British businesses are approaching the market.

Business understands that it must focus on cities and regions in addition to specialized business areas and should not regard China as a single market. In addition there are regional approaches to certain issues such as IPR and local enforcement that companies must continue to grapple with.

Richard Lambert

China has recognised the threat of climate change and has set ambitious targets for both improving energy efficiency and for building renewables. This will require substantial increases in power generating capacity in the years ahead, much of which will have to be drive n by coal.

China will therefore need access to foreign technology on a large scale, particularly in areas such as clean coal and carbon capture. CBI members and UK business are uniquely positioned to assist, train and develop this market both in China and for China.

The need for a more energy efficient economy is one reason why China is planning a shift in the main drivers of economic growth - away from big capital investment and exports and towards domestic consumption of goods and services. This change in direction in the economy will also play to the advantage of UK businesses.

As China continues to implement fundamental social and economic reform at an unprecedented pace it is important that barriers to trade continue to be lifted so that a business environment is created that benefits both foreign and domestic enterprises.

The CBI established its Beijing office in 2006 and we work closely with our partners at the British Embassy, the China Britain Business Council and the British Chamber to ensure that our members' interests are represented both through the bilateral UK-China relationship and via our own extensive business network.

The CBI is the UK's largest trade and business lobbying organisation with offices in Washington DC, Brussels and London and an active and growing base of more than 250 member companies in China.

A non-governmental, non for profit and wholly independent organisation, the CBI was founded in 1964 and reaches more than 240,000 member companies in its membership, including 140 Trade Associations, representing more than 10 million employees across the UK. It employs 250 people and has a network of 13 UK regional offices.

Visit our website at www.cbi.org.uk

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 4

INTRODUCTION

Comment by the Deputy Chief Executive of International Financial Services, London International Financial Services, London (IFSL) is an organisation working at the heart of the UKbased financial services industry. Its primary task is the worldwide promotion of the services, expertise and skills provided by its members on the basis of their UK operations. Globalisation has resulted in increasing diversity and continuing evolution of financial markets. Keeping ahead of these developments is a major challenge. The focus of IFSL's promotional work is therefore continually reviewed and directed to those areas that provide the greatest business opportunities.

Patrick Lamb

IFSL plays a pivotal role in organising events both at home and abroad. Independent and cross-sectoral, but with close links to Government, IFSL can access and operate internationally at levels and with a collective authority that can be difficult for members to achieve individually. By harnessing the expertise of Government and firms in the financial services sector, IFSL can coordinate and focus the needs and resources of each. By opening direct channels to the most senior levels of Government in the UK and overseas, IFSL can help establish contact with key decision makers. In this way we have helped open markets and overcome regulatory and other barriers to trade, expanding markets to the mutual benefit of the industry and countries around the world.

This range of activity enables IFSL to demonstrate to government ministers, officials and those who work in the financial services industry from China and many countries around the world, the benefits they can derive from accessing the skills and expertise available in the UK, particularly in the area of Education, Training and Qualifications (ETQ). China is a priority market for the

UK and for our members. For this reason IFSL is closely i nvo l ved with organising the Business Teams for the Lord M ayor's visits and we host meetings with official visito r s and journalists from China on a regular basis. Sir David Brewer is the Senior Consultant for Asia in IFSL and, as well as being a frequent visitor to China himself, will be assisting in the preparations for Business-related visits to China throughout 2008.

The UK is a leading international financial centre and IFSL's research and statistics team provide an informed and authoritative overview of the increasingly important role played by financial services and their value to the UK and the global economy. All IFSL reports are freely available on our website: www.ifsl.org.uk.

We are currently invo l ved in a UK government-led i n i t i a t i ve on financial services which is being undertake n in close partnership with UK Trade & Investment as well as the Corporation of the City of London. For any further information or assistance please email me at: p.lamb@ifsl.org.uk or give me a call on 020 7213 9121.

China is one of the world's oldest continuous civilizations. It has the world's longest continuously used written language system and has been the source of some of the world's great inventions, including the Four Great Inventions of ancient China: paper, the compass, gunpowder, and printing.

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 5

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 6

COUNTRY PROFILE

An Illustrious History Chinese civilisation dates back around 3,300 years and the Chinese people have shared a common culture longer than any other nation on Earth.

The Chinese writing system dates back almost 4,000 years. Its imperial dynastic system of government, which continued until 1911, was established as early as 221 BC. It is as if the Roman Empire in Europe had lasted right up until the 20th century, and during that time it had evolved a cultural system and written language still shared by all the peoples of Europe.

Throughout China’s long history, although specific dynasties were overturned on various occasions, the dynastic system itself survived.

At times, China was ruled by other ethnic groups, such as the Mongols during the Yuan Dynasty (from 1279 to 1368), and the Manchus during the Ch'ing Dynasty (from AD 1644 to 1911), but although these dynasties may have been founded by non-Chinese peoples, they were largely absorbed into the culture they governed.

(Photographer: Stephane Tougard)

The Shang (1700 BC to 1027 BC) was the first Chinese dynasty to leave written records. The Shang rulers expanded the borders of their kingdom to include all of the land between Mongolia and the Pacific Ocean. They also developed a lunar calendar consisting of twelve months of 30 days each.

Emergence of Modern China The dynastic system that had ruled China for over 2,000 years was overturned in 1911 in a republican revolution led by Sun Yat-sen.

It was replaced by a republican government, but this rapidly descended into little more than a series of shifting alliances between powerful regional warlords.

By the time of Sun Yat-sen’s death in 1925, the warlords were on the wane after ten years of strife and the Nationalists and Communists were beginning to wield increasing power.

The Nationalist party, under Chiang Kai-shek, initially had the upper hand, but by the early-1930s it was fighting a bitter struggle with the Communists, led by Mao Zedong.

After a long period of civil war, Communist forces prevailed. The People's Republic of China, with a Communist government led by Mao, was proclaimed in 1949. The Communists have been in power ever since.

The dynastic system may have disappeared from China, but the People's Republic occupies largely the same territory and governs the same people. In many ways, the culture and power of China is stronger now in the early 21st century than at any other period in its long history.

In the past 56 years, and in particular during the last decade, China's role in world economic and political affairs has grown increasingly powerful.

Terracotta Warriors (Photographer: Cj Yu)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 7

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 8

COUNTRY PROFILE

Out of the Shadow of Mao The socialist system established by Mao in 1949 ensured China's sovereignty, but at the same time it imposed strict controls over many aspects of people’s lives. Chinese people are now enjoying a more liberal way of life.

The period from 1949 through to 1979 saw large-scale redistribution of land to the peasants and private industries brought under state control.

The first Five Year Plan under the Soviet model was introduced in 1953, followed by Mao's ambitious ‘Great Leap Forward’ economic programme.

The Cultural Revolution launched in 1966, however, brought China's economic development to an abrupt halt. It took Deng Xiaoping's ‘Open Door’ policy, which began in 1979, to kick start the economy. By 2000 output had quadrupled and 2001 marked China’s entry into the World Trade Organisation.

Today, while there is no sign of the Communist Party relinquishing p ow e r, China is undergoing a huge commercial and creative transformation. A country the size of ten Japans has entered the world market. Hong Kong-style city skylines are springing up all across China, and tens of millions of people are finding jobs that earn them spending power their parents could never have imagined.

China is now one of the fastest growing markets in the world, offering huge trade and investment potential for overseas companies.

Mausoleum of Mao Zedong, Beijing

It is easy to underestimate the role that the State continues to play in Chinese business. Many large Chinese businesses remain in the State sector and, in addition, apparently private firms often turn out to have an element of State control.

Downtown Shanghai (Photographer: Luisa Fernanda)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 9

COUNTRY PROFILE

Government and Politics The Chinese Government acts in accordance with guidelines formulated by the 66 million-strong Communist Party of China (CPC), which cooperates with other parties through the Chinese Political Consultative Conference.

However, China's population, geographical vastness and social diversity frustrate attempts to rule by decree from Beijing.

The primary organs of state power are the National People's Congress (NPC), the President (head of state), and the State Council. The highest body of power, the NPC meets annually for about two weeks to review new policy directions and laws.

(Photographer: Paul Cowan)

There are three major hierarchies in China: the Chinese Communist Party (CPC), the Government and the military. The supreme decision-making body is the CPC Politburo and its 9-member Standing Committee, which acts as an inner cabinet. It is headed by the General Secretary of the Chinese Communist Party.

A Strong Party In periods of greater openness, the influence of people and organisations outside the formal Communist Party structure tends to increase, particularly in the economic realm. This phenomenon is most apparent today in the rapidly developing coastal region.

Nevertheless, in all important government, economic and cultural institutions, party committees work to see that party and state policy guidance is followed and that non-party members do not create autonomous organisations that could challenge party rule.

Control is tightest in urban economic, industrial and cultural centres; it is considerably looser in rural areas, where the majority of people live.

The Chinese leadership under Hu Jintao has identified reform of state industries and the establishment of a social safety network as top priorities. Strategies for achieving these goals include large-scale privatisation of unprofitable state-owned enterprises and the development of a pension system for workers.

Zhou Zhuang (Dreamstime.com)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 10

COUNTRY PROFILE

Geography Occupying an area of 3,750,000 square miles, China is twice the size of Western Europe and the third largest country in the world.

A country of contrasts, the terrain varies from plains, deltas and hills in the east to mountains, high plateaux and deserts in the west, including the Great China Plain.

Large-scale migrations from rural to urban areas have been a significant feature in the development of municipalities since the 1990s. The Han Chinese heartlands of central and eastern China are now dominated by densely populated urban stretches and busy expressways.

Further west or north of the major cities, where the landscape gives way to paddy fields and hills, the population thins out and begins to vary.

Overall, the population comprises 56 ethnic groups, the majority of which are Han Chinese, although the five autonomous regions of China are inhabited mainly by ethnic minorities.

China shares a border with several Asian countries, notably Vietnam, North Korea and India. Land transport across these borders is restricted.

The climate is extreme. In the sub-arctic north, temperatures dip to -15ËšC in December and January, and climb to 40ËšC in July and August. The climate in the south is in general sub-tropical, remaining fairly hot and humid until about the end of October. China experiences frequent typhoons as well as floods, tsunamis, earthquakes, droughts and land subsidence.

Great Wall of China (Photographer: Feng Hui)

The name Cathay, now largely confined to poetic usage, was historically used as a name for China, particularly its northern half. Cathay derives from the name of the Khitan ethnic group, which ruled over most of north China around 1,000 years ago.

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 11

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 12

MARKET OPPORTUNITIES

Economic Profile China has made massive economic progress over the last two decades and is now the world's fourth largest economy.

Since 1979, it has reformed and opened its economy, making the move from a sluggish, inefficient, Soviet-style centrally planned economy to a more market-oriented system.

An average annual growth rate of around 10% made China the fastest growing economy in the world between 1990 and 2005. Nevertheless, serious imbalances lurk behind the spectacular trade performance, high investment flows and strong GDP growth. Non-performing loans weigh down the state-run banking system and inefficient state-owned enterprises (SOEs) are still a drag on growth, despite announced efforts to sell, merge, or close the vast majority of SOEs. Export growth continues to underpin the country’s economic performance.

Total trade in 2006 surpassed US$1.76 trillion, making China the world’s third largest trading nation after the US and Germany. Exports totalled US$969 billion, with electrical machinery and equipment, power generation equipment, apparel, toys and footwear among the principal exports.

Cumulatively, the UK was still the No.1 EU investor in China by the end of 2006. UK capabilities fit well with China's priorities in the areas of transportation, telecoms, power generation, chemicals and petrochemicals and food processing. As the economy develops, a wider range of opportunities are opening up, for example in consumer goods, the environment, healthcare, education and training and financial services.

Rice Planting (Photographer: Arnon Ayal)

Roughly half of China’s labour force is engaged in agriculture, even though only 10% of the land is suitable for cultivation. China is among the world’s largest producers of rice, potatoes, sorghum, millet, barley, peanuts, tea and pork.

Chinese Tea (Photographer: Luisa Fernanda)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 13

MARKET OPPORTUNITIES

Not Just Exports China acceded to the World Trade Organisation (WTO) in 2001 and is currently in the process of undergoing a sevenyear transition period. WTO accession is immensely significant as a symbol of China’s move towards the centre of global trade networks.

How e ver slow and bureaucratic the process may be, China’s on-going m ove to more market-based regulatory principles, a requirement of WTO accession, can only further improve market access for British organisations.

Nor is it just a question of China becoming the manufacturing hub for the world. As the economy grows and Chinese society becomes wealthier and more sophisticated, demand for foreign goods and services is also increasing.

The country’s rapid economic growth has fuelled a strong growth in imports into China. According to the Chinese National Bureau of Statistics, the total value of imports increased to US$791.61 billion in 2006, up 20%. Key imports include electrical equipment, power generation equipment, petroleum products, chemicals and steel.

Container handling, Hong Kong (Photographer: Linda & Colin McKie)

The 2008 Beijing Olympics are forecast to create 1.8 million jobs in Beijing between 2005 and 2008 and trigger 0.8% annual growth for the Chinese capital's economy.

Opportunities in Abundance China offers huge trade and investment opportunities for British companies. However, it is no ordinary market for UK exporters and investors.

The sheer size of the country, its business culture and its trading system can make it a confusing and complex place in which to do business.

To support British organisations in developing their business in China, UK Trade & Investment has identified a number of key sectors of opportunity.

These include chemicals; water; ports and logistics; oil, gas, refining and petrochemicals; environment; automotive; aerospace; railway; financial services; mechanical, electrical and process engineering; metals and minerals and the creative industries.

Some of these and other sectors are highlighted in this Market Essentials folder. More in-depth information on all areas of opportunity can be found on the UK Trade & Investment website: www.uktradeinvest.gov.uk

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 14

MARKET OPPORTUNITIES

Chemicals Demand for high quality fine and speciality chemicals in China has increased in line with the expansion of agriculture and industry, particularly in sectors such as textiles, electronics, healthcare, building, cosmetics and petroleum.

Poor domestic product quality and variety means that this demand is increasingly being met through imports.

China currently has 10 fine and speciality chemical technology development centres, where over 3,800 companies manufacture over 9,200 chemicals.

Annual output is about 8.7 million tonnes, but it accounts for only 35% of gross chemical output, which compares with a ratio of up to 65% in developed countries.

In addition, a high proportion of the chemicals China produces domestically are highly toxic, causing serious pollution and environmental damage. In recent years the Government has put more emphasis on addressing the country’s environmental problems by tightening the regulatory environment and more rigorously enforcing patents.

However, Chinese chemical producers lack the technology, financial resources and research capabilities to develop their own innovative chemicals. This opens up opportunities for high quality, high technology UK producers. There is also potential for chemicals exporters in the fields of surfactants, coatings, speciality dyes and fabric finishes.

(Photographer: Franz Pfluegl)

The construction of the largest deep-water wharf in south west China began in June 2005 in Zhujiaba in Chongqing province. The US$60.5 billion project is aimed at developing a major logistics centre on the upper reaches of the Yangtze River, integrating waterway, roadway and railway. The new wharf will have an annual throughput capacity of 300 million tonnes on completion in 2007.

Junks on the Yangtze River (Photographer: Aschwin Prein)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 15

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 16

MARKET OPPORTUNITIES

Growth in Gas China is the world’s largest coal producer and Chinese industry has traditionally been largely coal-powered.

However, the country has recently embarked on a major expansion of its gas infrastructure.

The natural gas market is still relatively underdeveloped at present.

Gas accounts for just 3% of total energy consumption. But China has rich natural gas resources and there is potential for significant consumer growth.

Until the 1990s, domestic gas reserves were poorly developed and natural gas was used largely as a feedstock for fertiliser plants, with little use for electricity generation.

More recently though, Beijing and Shanghai have both prioritised gasfired power. Other areas of China such as Guangzhou and Chongqing are following suit, extending their gas distribution networks to residential users. Consequently, gas usage is forecast to triple by 2010.

This growth is underpinned by the aggressive plans of China’s state companies to invest US$15 billion in the natural gas distribution market.

(Photographer: Sascha Burkard)

According to a report by Deutsche Bank, China’s daily demand for petroleum will reach 9.3 million barrels by 2010, an increase of 37% on 2005. In 2004, China surpassed Japan and became the second largest petroleum consumer in the world. In the past ten years, China’s daily demand for petroleum has increased sharply from 3.28 million barrels to 6.79 million barrels.

Oil and Petrochemicals China is the world's second largest oil consumer and currently imports 20% of its oil requirements.

Anticipating the growing need for oil, as well as gas, China plans to reduce its dependence on imports by developing its own hydrocarbon resources.

Most of its production currently comes from fields in the north and north east of the country. But with the mature fields facing a significant decline in output, the country is investing heavily in offshore exploration in the Pearl River Delta, South China Sea and Bohai Sea. Furthermore, China’s petrochemical and related sectors are currently experiencing an unprecedented level of engineering, design and construction, with numerous world-class petrochemical facilities coming on stream between 2005 and 2007.

Petrochemicals are a key driver of Chinese petroleum demand, particularly to manufacture ethylene and other products contributing to the country's massive output of consumer durables.

South China Sea (Photographer: Lim Weng Chai)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 17

MARKET OPPORTUNITIES

Automotive China ranks number three in the world for automotive consumption and number four for production. In terms of motorcycles, it has been number one in the world for both consumption and production for the past 13 years.

Automobile sales in 2005 reached 6 million, including 2.6 million cars. It exported 170,000 cars, an increase of 187%, and 4 million motor cycles.

In 2004, it imported 176,000 cars, an increase of 2.4%.

There are more than 120 vehicle plants in China and all of the world's top nine automakers have established joint ventures with Chinese partners.

Under the terms of China's accession to the WTO, it is gradually liberalising the domestic automotive market in areas such as tariffs, nontariffs, investment and trade-in services. Measures introduced so far include the elimination of all import licences and quotas and the reduction of import duty on automobiles to 25% on average, and a reduction in the tariff on automotive parts to 10%.

The manufacturing capacity of China's automotive industry is expected to expand in coming years. However, there are concerns about overheating.

Increased competition has already led to price-cutting, increasing pressures on profit margins. Some market consolidation is expected.

The industry also faces serious challenges due to oil shortages, traffic congestion and environmental pollution. This has increased emphasis on environmentally sensitive technology. Opportunities exist in such areas as emission reduction, fuel cell technology and the development of efficient supply lines.

Shanghai (Dreamstime.com)

China is only the third country to put a man into space, after Russia and the USA. Its second manned spaceflight ended successfully in October 2005. A third is planned for 2007.

Aerospace Despite undergoing a great deal of internal change, the Chinese aerospace sector offers some of the most exciting and realistic opportunities for UK businesses.

With an average annual GDP growth rate of over 7%, the Chinese e c o n o my has developed rapidly since the 1990s. The General Administration of Civil Aviation of China (CAAC) predicted that the annual growth rate of China's civil aviation industry would be approximately 14% until 2010, and from 2011 to 2020 the annual growth rate will be around 11%. The total ton-kilometres would be targeted at 50 billion in 2010. Aircraft fleet would reach to 1,580 by 2010. Also by 2025, the fleets will be expanded to 4,000 aircraft. To meet that goal, the country is in need of 11,000 pilots by 2010 and another 18,000 by 2015. China had a fleet of 960 commercial aircraft as of the second quarter of 2006.

There are 147 commercial airports in China, 25 of these are large scale airports and 57 are international airports. The airport density is 1.4 per 100 km2.

In 2005, passenger throughput reached 280 million and cargo throughput reached 6.33 million tonnes, up 16% and 15% respectively since 2000.

Civil airport development is a key priority in the eleventh Five Year Plan (2006-2010). Around Renminbi 140 billion (£10 billion) has been committed to expanding the country’s airports. This includes the construction of 42 new airports on the mainland, many of which will be in central, western and north eastern China. The number of airports will rise to about 190 by 2010 from the 147 at present, with the to t a l reaching 220 by 2020. This includes three large ‘hub’ airports in Beijing, Shanghai Pudong and Guangzhou, all major international centres for both cargo and passenger transportation.

Opportunities for foreign companies are limited due to the restrictions on foreign investment in China’s aviation sector. But opportunities nevertheless exist, through joint ventures, partnerships and alliances with Chinese aviation companies.

British companies have already won important airport design contracts.

For example, a consortium between architects Norman Foster and Partners, engineers Arup and Dutch airport planners NACO, working with the Beijing Institute of Architectural Design and Research, won the contract to design the new Terminal 3 at Beijing airport at the end of 2003. Other British companies have won contracts in project management, supplying airport equipment and air traffic control and ticketing systems.

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 18

MARKET OPPORTUNITIES

Rail Transport China is investing heavily in its rail infrastructure.

It is a key element of the Government’s strategy to encourage sustainable economic growth, opening up isolated areas of the country and offering a viable alternative to road traffic.

China already has the third largest rail network in the world and is number one in Asia in terms of both double tracks and electrified tracks.

In January 2004, the Medium and Long Term Rail Net Plan was approved by the State Council. Its target is to extend the current 45,000 miles (74,408 km) of track to over 60,000 miles (100,000 km) by 2020.

The maximum speed for standard Chinese passenger trains is 100 miles per hour (160 km/h). But given the country’s enormous size, developing a high-speed rail network is a priority. The ‘Leaping Development Strategy’ aims to accelerate passenger train speeds to 125 miles per hour (200km per hour).

To achieve its rail objectives, the Chinese authorities recognise that technical standards and infrastructure need to be upgraded. China is particularly open to state of the art technologies from other countries, such as the Japanese Bullet train.

Up to 30 cities have plans for Light Rapid Transit/Metro projects, backed by five-year expenditure of around US$24 billion. The main constraint for overseas equipment suppliers is the Government’s strict localisation policy.

70% of project value must be manufactured within China. The policy means that to have any chance of success foreign suppliers need to consider joint ventures. However, companies that already supply key players such as Alstom, Bombardier and Siemens, stand a good chance of supplying them for projects in China.

The 115-kilometre Beijing-Tianjin high-speed railway project began construction in July 2005. It is scheduled for completion by December 2007 and to begin operating in July 2008. The new line will support train speeds of up to 200 kilometres per hour.

Environment One of the serious negative consequences of China's rapid industrial development has been increased pollution and degradation of natural resources.

According to China's own evaluation, two-thirds of the 338 cities for which air quality data is available are polluted. Almost all rivers are polluted and half of the population lacks access to clean water. Acid rain falls on 30% of the country. Studies estimate pollution costs the Chinese economy up to 10% of GDP each year.

In recent years, China has strengthened its environmental legislation and made some progress in stemming environmental deterioration. Today, China has a small, though rapidly developing, environmental protection industry. Beijing in particular is investing heavily in pollution control as part of its campaign to host a successful Olympic Games in 2008.

The drive towards efficient use of coal and conversion to natural gas has created opportunities for foreign companies. There is potential for the supply of desulphurisation equipment for treatment of coal/combustion gases and good prospects for coal washing technologies, coal gasification, liquefaction and advanced combustion technologies.

Pollution in Guangzhou (Photographer: Yuetao Huang)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 19

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 20

MARKET OPPORTUNITIES

Financial Services Until recently, China's capital markets remained relatively u n d e r d e veloped, lacking professional expertise, financial management skills and information technology.

However, China has embarked upon a fundamental overhaul of its financial services sector. This process has further accelerated since China joined the WTO in 2001.

The modernisation process has led to a fundamental and ongoing restructuring of its capital markets and the legal statutes that underpin the financial system.

The industry is also becoming more sensitive to the needs of retail and corporate customers, developing an increasingly diverse range of new financial products.

In line with its WTO commitments, China has made considerable liberalisation in the financial services sector during its post-WTO transition from 2001 to 2006, however, some restrictive measures still exist in certain areas of the sector. In the coming years, the domestic financial services sector is expected to gradually open up to greater foreign participation.

(Photographer: Tiberius Dinu)

There are seven major Chinese dialects and many sub-dialects. Mandarin, the predominant dialect, is spoken by over 70% of the population. About two-thirds of the Han ethnic group are native speakers of Mandarin; the rest, concentrated in southwest and southeast China, speak one of the six other major Chinese dialects.

Building and Construction China is undergoing rapid urban and industrial development and growth in the construction sector has been correspondingly huge.

The total output of the Chinese construction industry has risen by over 20% every year for the past five years. Over the next ten years, around 50% of all global construction will be in China, according to figures from the Ministry of Construction.

The rapid market growth is providing major opportunities for UK business, but State control is ostensibly strict. All major projects worth US$30 million or more must be approved by the State Development Planning Commission. Following approval, though, responsibility for the project falls to individual provincial governments and municipalities, which means that even the poorer provinces are seeking funding for approved projects, creating significant opportunities for BOT (Build, Operate and Transfer).

Labour and materials are cheap in China, which means that construction works can be undertaken at little cost. It also means that, with the exception of subcontracted specialist services, foreign firms cannot compete with the domestic private housing sector. However, as China develops, the demand for higher quality products grows, increasing the market demand for highspecification materials for use in prestigious buildings.

The UK’s reputation in consultancy is strong, particularly for project management, design and engineering. It places British companies in a good position. However, as all project planning and design has to be submitted through a design institute, joint venture agreements with institutes are advisable.

World and regional events, such as the Beijing Olympics 2008, Shanghai Expo 2010, the Asian Games 2010 in Guangzhou and the World University Games 2011 in Shenzhen, are predicted to create further opportunities for overseas companies.

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 21

MARKET OPPORTUNITIES

Ship Building China is already a hugely important player in the global shipbuilding market, a position it is expected to further strengthen over the coming years.

The aim is to develop an industrial structure that meets both civilian and defence requirements, improving the quality, productivity and efficiency of the shipbuilding sector.

China aims to ove r t a ke both South Korea and Japan for overall shipbuilding capacity by 2010, increasing its share of the world market to over 16%.

The development of the shipbuilding industry will also lead to a greater need for marine equipment. The demand for marine equipment in the local shipbuilding market is estimated to be over 14 billion Renminbi (approaching £1 billion) per year.

China's general economic development has been accompanied by a huge increase in foreign trade. This in turn has resulted in strong growth in its international containerised traffic, which now accounts for between 20% and 25% of total global container shipments.

The majority of China’s shipyards are able to offer competitive pricing and an efficient service. New capacity and productivity improvements mean that the quantity of Chinese-built vessels entering the market should continue to grow.

Three Gorges Dam, Yangtze river (Photographer: Aschwin Prein)

China’s 2002 Population and Family Planning Law advocates one child per couple. Enforcement varies and relies heavily on ‘Social Compensation Fees’ to discourage extra births.

Metals and Minerals (Products and Processing) China's domestic iron and steel industry is increasingly looking for foreign co-operation to improve its efficiency and competitive n e s s .

Although still largely state-owned, Government control over iron and steel production has relaxed. Price controls on all steel products (except high need categories such as defence industries, agriculture and railway building) have been abolished. An increasing number of major iron and steel enterprises are now being granted the right to import and export their own products.

The industry is also striving to become more efficient. The number of employees has been halved, in line with the general policy of separating government from industry.

Additionally, it is estimated that China is fast becoming Asia's largest market for pig iron. But domestic production will fall short of demand.

Chinese iron and steel companies are focussing on streamlining their product, upgrading their technology and improving quality, so the decrease in domestic output is expected to be accompanied by an increase in quality.

Steel Structured Exhibition Centre, Canton (Photographer: John Valenti)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 22

MARKET OPPORTUNITIES

Plastics and Resins Over the past five years, the general synthetic resins market in China has grown by around 6.5% annually.

Annual growth in the engineering plastics materials market has been even greater, at around 10%.

However, the local output of plastics materials and resins can only satisfy 50% of market demand. As a result, China must import large quantities of plastics materials each year.

Imports of general-purpose thermoplastic resins, including polyethylene (LDPE and HDPE), polypropylene (PP), polystyrene (PS), acrylonitrile butadiene styrene (ABS), and polyvinyl chloride (PVC), are particularly strong. Special engineering plastics and other resins are used widely in various industries as special materials.

Since January 2005, China has reduced its average chemical tariffs by more than 50% and most quotas have been eliminated on virtually all chemical products.

However, British firms face stiff competition from regional competitors such as Japan, Korea and Taiwan, as well as other Western suppliers such as the USA and Germany.

(Photographer: Angelo Gilardelli)

Guangdong Province is to invest US$22.2 billion in building or expanding five oil refineries and five ethylene projects.

The projects include the expansion of three oil refineries in Guangzhou, Maoming and Zhanjiang, one new oil refinery in Huizhou and three on-going ethylene projects in Maoming, Huizhou and Guangzhou. It is estimated that the projects will increase Guangdong's oil refining capacity to 63 million tonnes by 2010 and 100 million tonnes by 2020.

(Photographer: Steffen Foerster)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 23

MARKET OPPORTUNITIES

Education and Training China's education system is undergoing a complete overhaul, from nursery level through to higher education.

The aim is to bring it more up to date, including greater use of lifelong learning programmes, technology in education and developing partnerships between education and industry.

In implementing these new approaches to learning, China is actively seeking advice from other countries, including the UK. Chinese children are required to attend school for at least nine years.

During this period, students complete both the primary and junior middle school programmes.

Foreign languages such as English are optional courses in the later part of primary school education. To go on to the next level of education (senior middle schools or middle-level technical schools), students have to sit and pass entrance examinations.

At the high school level, greater importance is attached to learning English, which is the official second language.

The main objective of Chinese higher education (universities and colleges) is to train specialists to work competently across all sectors of industry. The Ministry of Education has launched a comprehensive higher education modernisation programme, including the upgrade of 101 universities and the creation of two 'super' universities at the already elite Beijing and Qinghua universities.

The Ministry of Education also wants to adopt a modern, creative approach to learning in nursery and primary schools.

(Photographer: Bobby Deal)

China has around 113 million internet cafes, or wang bars. According to the Ministry of Culture, an average of 40 million people visit the bars every day. The total annual spend in internet cafes is US$2.3 billion.

Mechanical, Process and Electrical Engineering Government action has cooled down the runaw ay growth in China’s construction sector over the past two years.

However, with many large projects, such as the Three Gorges dam, South-to-North water transfer project, Shanghai World Expo and Beijing Olympics all coming on stream in the next three years, plus other major on-going development, initiatives such as the regeneration of northeast China, the northwest China development programme and the agriculture investment programme, considerable further investment in the engineering sector is anticipated.

The mechanical, process and electrical engineering sector is still a relatively difficult market to enter, but some British companies have experienced significant success, particularly in infrastructure projects in Shanghai, for example, where the development of the hi-tech Pudong New District is creating opportunities. Competition from domestic companies is getting fiercer, though, as more expertise and modern technology is acquired.

Many British contractors and consultants have representative offices in China's major cities. Key foreign competitors include companies from Japan, USA, Hong Kong, France, Italy and Germany.

Jin Mao Tower, Shanghai (Dreamstime.com)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 24

MARKET OPPORTUNITIES

Healthcare Services The Chinese medical device market is the largest in Asia outside Japan and one of the fastest growing in the world.

Imports account for approx i m a tely 50% of the US$2.5 to US$3 billion market. The USA is the main supplier, with around 36% of the import market.

As China’s WTO commitments are phased in, profitability is expected to fall as a new regulatory environment is introduced. However, over the next 10 to 12 years, market indicators are extremely healthy.

The market for high quality, patient-oriented healthcare services is small, but growing steadily. As many as 85% of the population lack health insurance and only 1% to 2% can afford Western-style medical care.

Historically, Government spending on healthcare has been immense. All Government employees and workers at state-owned enterprises enjoy virtually free medical care for themselves and their dependents.

The Government is addressing the issue. For example, a Basic Medical Insurance Scheme was introduced in 2000 with the goal of offering basic health care to employees in urban areas.

However, the ongoing reforms are not designed to expand the number of insured, but rather to replace Government funding with enterprise/employee funding.

(Photographer: Jonathan Vasata)

It has been estimated that China will become the world’s largest national economy by the middle of this century. If this happens, the country will be reclaiming the position it has held for much of the last thousand years, until the Industrial Revolution in the West. Even as late as 1820, China accounted for well over a quarter of global economic activity.

Water It is estimated that 400 of China’s 670 cities are suffering from a severe water shortage.

Currently, over 60% of the country’s cities do not have sewage plants due to lack of investment. About 29.5% of China’s seven major water systems only reach third grade standard, and 44% are fifth grade. Half of the ground water is polluted. In addition, overuse of underground water is causing the ground to sink in some cities.

As a result, developing the water sector is now a priority for many Chinese provinces. It is the top the top priority for Guangdong Province, for example, where according to the Government’s environmental strategy for 2000-2010, over 60% of environment spending will go to the wastewater treatment sector. Water sector development is being given similar prominence in provinces and cities right across China, such as Beijing, Hong Kong, Foshan and Shenyang, and opportunities are developing accordingly.

But market entry is not without risk. BOT (Build, Operate and Transfer) is still in its early stages and it is not easy to export products directly, with joint ventures much the preferred option. Some regional water groups, such as Shenzhen Water Group and Foshan Water Group, have already been in discussion with foreign water companies regarding joint ventures. Shenzhen Water Group, for instance, formed a joint venture with French Company Veolia in August 2004, taking a 45% share for US$400 million. There are, however, projects funded by the World Bank or Asian Development Bank which offer opportunities to export products directly.

Gondoliers on the canal in LuZhi (Photographer: Ben Fox)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 25

MARKET OPPORTUNITIES

Retail As one of the first sectors opened to foreign investment after WTO accession in 2001, China’s retail sector has witnessed unprecedented growth and an influx of foreign retail giants.

More than half of the world’s top 50 retailers now have operations in China, with most of them opening stores in Beijing, Shanghai and other major coastal cities.

Competition is intense as the growth in supply outpaces demand, which has led to considerable pressure on prices.

Although the retail market is still dominated by domestic brands, foreign brands have made significant inroads and are particularly popular with the younger generations.

Walmart, for example, has successfully opened several retail establishments. It plans to open more outlets in other key cities, including Beijing and Shanghai.

Many domestic retail outlets in the larger urban centres also stock foreign branded products.

Largo do Senado, Macau (Photographer: Simon Gurney)

Around 10 million couples get married in China each year. Last year, they spent approximately US$30 billion on wedding ceremonies. In Shanghai alone, there are between 80,000 to 150,000 newlyweds each year. The average cost of a Shanghai wedding is US$15,000.

Textiles Textiles is an enormously important sector for China, in particular eastern China.

Around 19 million people are employed in the industry, which produces around 25% of all global fibre output. Similarly, China produces about 15% of global textiles and garment exports.

The sector is already benefiting from WTO membership as the strict quotas on Chinese textile exports to the EU and USA have been reduced. In 2003, China’s textile and apparels exports were worth US$80.48 billion, an increase of 27.7% over the previous year. Imports for the same period were worth US$15.59 billion, representing a p o s i t i ve balance of trade of US$64.9 billion.

The textiles industry is one of China’s most modern sectors. State owned textile enterprises are no longer the main players in the industry. By the end of 2003, there were only 3,153 state - ow n e d textile enterprises, compared to 18,259 non-state - owned textile e n terprises. At the same time, the industry has developed a number of world-class production bases, such as Pinghu (the biggest garment production base), Wenzhou (menswear and footwear), Hangzhou (womenswear), Zhuji (socks) and Xiangshan (knitwear).

The entire textiles industry is aggressively modernising to maintain its dominant position. Many domestic textile firms are upgrading their

product mix, which is expected to create high demand for advanced textile manufacturing equipment from abroad. In 2004, China i m p o r ted US$4.7 billion of advanced machinery, a 0.9% rise from the year before.

As levels of disposable income in China continue to increase in the major cities, there is also growing demand for fashion clothing and accessories, high quality fabrics, technical and interior textiles.

In interior textiles, for example, new hotel developments, airports and stadiums for the Olympics in 2008 and the World Exposition in 2010 are creating huge potential opportunities for high quality British i n terior textiles and carpets.

Shanghai is the fashion capital of mainland China. It has its ow n i n ternational fashion festival and there are a growing number of designer brands in the market already (Aquascutum, Burberrys and Alfred Dunhill all have a prominent presence in China). The pote n t i a l goes beyond the designer labels and down to high street leve l , h ow e ver, where the under-35s in particular are prepared to spend on good quality clothing - an area where British high street brands are well placed to win business.

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 26

MARKET OPPORTUNITIES

Packaging Most Chinese industries have developed rapidly in recent years, resulting in an increased demand for packaging and packaging machinery.

Packaging usage is growing by around 20% annually. Demand for imported packaging equipment continues to increase and, in particular, there is a growing need for innovatve and high quality packaging.

This growth provides excellent opportunities for foreign packaging equipment firms.

The strength of cost-conscious domestic packaging firms tends to be in less sophisticated equipment. The common perception is that Chinesemade machinery is adequate for simpler applications, but that foreignmade machinery is more suitable for complex packaging needs or lines that require continuous operation.

Packaging firms value foreign-made machinery for its fast packaging speed and automation, as well as reliability. Therefore, Chinese customers are increasingly inte r e s ted in more complex, highperformance foreign machinery which has no domestically manufactured equivalent. Other major considerations are the reduced manpower and maintenance requirements of imported machinery.

(Photographer: Peter Hansen)

China is the manufacturing workshop of the world. It produces 90% of the world’s toys, 70% of the world’s photocopiers and 50% of the world’s cameras. In the last decade, China has built enough roads to loop around the equator 16 times.

Mah-jong (Photographer: Feng Hui)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 27

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 28

MARKET OPPORTUNITIES

Telecommunications The mobile communications equipment market in China has h i s torically been dominated by European and North American companies.

How e ve r, rapidly growing domestic manufacturers, led by Huaw e i Technologies and ZTE, which have tended to focus on business opportunities in South America, South East Asia and Africa, are now making much greater inroads into their home market as well.

According to Ministry of Information Industry (MII) figures, in 2005 Chinese telecom carriers inve s ted US$25 billion to recruit 45 million f i xed line telephone subscribers and 58 million cellular phone users.

Much of the secto r ’s strength is focused on Guangdong province. By February 2006, the number of mobile subscribers in China was 404 million, of which 64.9 million (16%) were in Guangdong. The province’s major cities, Guangzhou and Shenzhen, tend to be the first cities in China to start new telecom services. Both Huaw e i Technologies and ZTE are based in Shenzhen.

(Photographer: Dan Thomas Brostrom)

In 2005, China manufactured 40% of the world’s mobile phone handsets, amounting to 303 million handsets. 228 million of these were exported, 97% of them by the China operations of multinational companies, such as Motorola, Nokia, Samsung and Sony Erricsson. These export figures represent a 56% increase on 2004.

Computer Software China’s software industry developed slowly during the 1990s. How e ve r, a significant Government incentive programme has helped to stimulate a more recent period of s teady growth.

Although China has many software companies, Chinese software firms only account for 2.6% of the global software market. Within China, foreign software still dominates and should continue to do so, especially in the high-end software market.

The top four foreign software companies are Microsoft, IBM, Oracle and Sybase, while the top three domestic software companies are China National Software Service Corporation, China Ufida and China Ufsoft.

More investment in IT infrastructure across the whole economy will create huge opportunities for further growth for both foreign and domestic software companies.

Application software and customised software in particular show good growth potential. High-end products such as database management systems, systems management software, networking security software and industry application software are the fastest growing prospects for foreign software firms.

However, competition is fierce. Foreign suppliers already account for 65% of the country’s total software market.

China’s accession to the WTO is also driving growth in the IT and software market. Software import tariffs have been reduced to zero and the Chinese Government has issued a number of policies ranging from export incentives to value-added tax rebates.

(Photographer: Adrian Hughes)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 29

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 30

VISITING

Travel Essentials Visitors to China require a valid passport and visa. A business visa will only be granted where there is evidence of an invitation from a Chinese organisation.

Many airlines serve China, flying mainly to Beijing, Hong Kong and Shanghai. The flight time to these is approximately 10 hours. From Hong Kong, several airlines fly to many Chinese cities. Travellers leaving China by air are subject to a departure tax, payable only in local currency.

Air travel is the most convenient way to get around in such a large country. It is not always possible to purchase or confirm tickets for Chinese domestic flights from outside China, but tickets may be bought and/or confirmed in the larger hotels on arrival. Travellers are advised to book well in advance if intending to travel around the Spring Festival or other major Chinese holidays.

Some hotels in larger cities provide courtesy bus services to and from airports. Taxis are also available and are reasonably priced. Trains reach every province and offer a cheaper, marginally faster and safer alternative to long distance buses.

(Photographer: Patricia Hofmeester)

Tipping is officially forbidden in China, although small tips are often expected by porters and bell boys in larger hotels.

The custom varies, though, and tips will often be refused.

Business Etiquette Introductions and the exchange of business cards are a formal affair. Introductions are usually made in order of seniority and include the shaking of hands.

Business cards are essential and should be presented with both hands.

When receiving a card, you should examine it closely for a few moments.

When addressing people, remember that the family name precedes given names. Thus Mr Li Hongjun should be addressed as Mr Li. Avoid calling a Chinese person by their given name alone unless specifically invited to do so. It is currently fashionable to address a younger woman as ‘Miss’ and an obviously older woman as ‘Madame’. When addressing senior leaders, it is polite to include the person's title in the appellation (for example, Director Wu).

Chinese politics are widely discussed. Other conversational topics include family, sport and culture. The concept of losing face is much stronger than in Western cultures, so avoid contradicting anyone in public if possible.

Small gifts are appreciated, but in the light of recent regulations concerning bribery, care must be exercised in how they are given.

An increasing number of younger Chinese managers and government officials speak some English, but formal meetings and negotiations still require an interpreter.

(Photographer: Marcelmooij)

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 31

VISITING

Building Relationships China is often regarded as a difficult market, but it doesn’t have to be.

The country comprises many different provinces, each with its own unique economic and social characteristics, so generalisations are o f ten misleading.

Companies interested in doing business there should visit in person in order to gain a better perspective and understanding of the location, the country in general, the business climate and the people.

Moreover, Chinese businesses generally prefer face-to-face meetings, which are perceived to demonstrate a serious commitment to the market.

Personal relationships are the key to finding a good business partner in China and networking can pay real dividends. It is advisable to develop a network of relationships with people at various levels across a broad range of organisations.

Local agents are a good starting point for developing contacts in China.

They possess the knowledge and contacts to better promote a foreign business’s products and to help break down institutional, linguistic and cultural barriers.

Business Centre, Beijing (Photographer: Yang Yu)

Around 70,000 volunteers are being recruited to work at the Beijing Olympic Games in 2008. The majority are expected to be college and secondary school students.

Understanding the Language - Pinyin In 1979, the Chinese Government officially adopted the pinyin system for spelling Chinese names and places in Roman letters.

Pinyin is a system of Romanisation invented by the Chinese. It has long been widely used in China on street and commercial signs as well as in elementary textbooks as an aid in learning Chinese characters.

Variations of pinyin are also used as the written forms of seve r a l minority languages.

Pinyin has now replaced other conventional spellings in China’s Englishlanguage publications. The British Government has adopted the pinyin system for all names and places in China. For example, the capital of China is now spelled "Beijing " rather than "Peking."

In the pinyin system, letters are pronounced much as they would be in English with the following exceptions.

Complex initial sounds: c – like the t’s in it’s q – like the ch in cheap x – like the sh in she z –like the ds in lids zh – like the j in just Final Sounds: e – Pronounced like “uh” eng – like the ung in lung ai – as in aisle ui –pronounced way uai – like the wi in wide i – like the i in skin ua –like the wa in waft ao – like the ow in now ian – pronounced yen ou – like the ow in know uan – pronounced when *When zh, ch, sh, zh are followed by an “i,” the “i” is pronounced like an r.

China 2nd Edition Inserts 07

13/5/08

12:40 pm

Page 32

KEY FACTS

OFFICIAL NAME: People's Republic of China (Zhonghua Renmin Gongheguo).

CAPITAL: Beijing (Peking).

POPULATION: 1.321,851,888 (July 2007 est).

NATURAL RESOURCES: coal, iron ore, crude oil, mercury, tin, tungsten, antimony, manganese, molybdenum, vanadium, magnetite, aluminium, lead, zinc, uranium, hydropower potential.

AREA: 3,750,000 square miles.

MAJOR CITIES (IN SIZE ORDER): Shanghai, Beijing, Hong Kong, Tianjin, Wuhan, Guangzhou, Shenyang, Chongqing, Nanjing, Harbin.

GOVERNMENT: Communist party-led state.

WEIGHTS AND MEASURES: metric.

HEAD OF STATE: State President, Hu Jintao.

CURRENCY: yuan (CNY). It is also referred to as the Renminbi (RMB).

HEAD OF GOVERNMENT: Premier of the State Council, Wen Jiabao.

RULING PARTY: Zhongguo Gongchandang (Chinese Communist Party).

EXCHANGE RATE: CNY15.5 = £1 (October 2007).

GDP: US$10.17 trillion (2006).

PER CAPITA GDP: US$7,700 (2006).

ADMINISTRATIVE DIVISION: there are 23 provinces in China (including Taiwan), five autonomous regions, which contain several minority groups (Guangxi, Inner Mongolia, Ningxia, Tibet and Xinjiang), four municipalities (Beijing, Shanghai, Chongqing and Tianjin) and two special administrative regions (Hong Kong and Macau), which enjoy considerable autonomy.

RELIGIONS: although China is officially atheist, there are followers of Taoism, Buddhism, Islam and Christianity.

LANGUAGES: Mandarin (Putonghua), plus many local dialects.

ETHNIC GROUPS: Han Chinese (91.9%), Zhuang, Manchu, Hui, Miao, Uygur, Yi, Mongolian, Tibetan, Buyi, Korean and other nationalities (8.1%).

MAJOR INDUSTRIES: iron and steel, coal, machine building, armaments, textiles and apparel, petroleum, cement, chemical fertilisers, footwear, toys, food processing, automobiles, consumer electronics, telecommunications.

GDP GROWTH RATE: 10.7% (2006).

TIME: GMT plus eight hours.

INTERNATIONAL DIALLING CODE: 00 86.

HOURS OF BUSINESS: Government offices and state corporations are open from 08.30 to 17.30 and banks are open from 09:00 to 17:30. Many offices are effectively closed on Friday afternoons. Most shops are open continuously between 09.00 and 20.30.

The Chinese rarely miss a meal, eating both lunch and dinner early. Lunch usually starts around 11.30-12.00 and dinner starts at 18.00 at the latest. It is therefore advisable to avoid scheduling meetings at lunchtimes if possible.

Lijian City (Dreamstime.com)

INTRODUCTION

USEFUL CONTACTS

Foreword by the British Ambassador to China Globalisation has been pulling China rapidly into the world. Britain’s interests in China have grown commensurately. We now have extensive bilateral links in every major field.

China has been our fastest growing market for the past seven years. In 2006, total two-way trade in goods totalled US$30.7 billion, a 25.2% increase over 2005.

As the largest EU investor in China, the UK had over 5,359 projects in China by the end of 2006 with a realised value of US$13.9 billion. Our export of services rose 54% over the two years of 2004 and 2005. In return, Chinese investment in the UK is increasing rapidly.

We look forward with great pleasure to being actively involved in the two major global events China will be hosting over the next few years: the Beijing 2008 Olympics and the 2010 Expo in Shanghai, and to continued rapid bilateral expansion in trade and investment in the years to come.

Sir William Ehrman, KCMG

Over 300 mainland Chinese companies have now invested there. More and more Chinese companies are also listing on the London Stock Exchange: the numbers on the Alternative Investment Market (AIM) rose from 21 to 51 in 2006.

China has been the UK's fastest growing market for the past seven years. In 2006, total two-way trade in goods totalled US$30.7 billion, a 25.2% increase over 2005.

Introduction by the Chinese Ambassador to the UK China and Britain have maintained robust economic and trade relations in recent years. There is, however, considerable potential for further cooperation in a number of fields, including energy, environmental protection, bio-technology, information and new materials.

In 2006, bilateral trade exceeded US$30 billion, a thirtyfold increase on trade levels twenty-five years ago.

Britain continues to be the largest EU investor in China and is its third largest overall trading partner. The deepening of economic ties between the two countries has brought tremendous opportunities for further trade and investment.

Madam Fu Ying

But there is no room for complacency. China and the UK are the fourth and fifth largest economies in the world.

Bilateral trade, however, accounts for less than 2% of China's total and 3.5% of the UK's total, so there is much room for improvement. In terms of investment, the UK is number one in China among European countries, but is leading Germany by only US$500 million and on an annual basis, the UK has been behind Germany for the last three years. China and the UK must therefore continue to work hard to translate opportunities into realities.

Where, then, should UK businesses focus if they are to succeed in China? The following are some indications: first, environmentally-friendly projects. All Chinese provinces are under pressure to upgrade technology and to replace old infrastructure, so there is the

BRITISH EMBASSY 11 Guanghua Lu, Jian Guo Men Wai Beijing 100600, China Tel: +86 10 5192 4000 Fax: +86 10 6532 1937/8/9 Email: commercialmail.beijing@fco.gov.uk Web: www.uk.cn

BRITISH CONSULATE-GENERAL Suite 301, Shanghai Centre 1376 Nanjing Xi Lu Shanghai 200040, China Tel: +86 21 6279 7650 Fax: +86 21 6279 7388 Email: commercial.shanghai@fco.gov.uk Web: www.uk.cn

UK TRADE & INVESTMENT China Unit, Kingsgate House 66-74 Victoria Street, London, SW1E 6SW Tel: 020 7215 8000 Contact: Mushtaq Bux Email: mushtaq.bux@uktradeinvest.gov.uk Web: www.uktradeinvest.gov.uk

BRITISH CONSULATE-GENERAL Commercial Section 7th Floor, Guangdong International Hotel 339 Huanshi Dong Lu Guangzhou 510098, China Tel: +86 20 8314 3000 Fax: +86 20 8333 6485 E-mail: guangzhou.commercial@fco.gov.uk

BRITISH CONSULATE-GENERAL 28/F, Metropolitan Tower 68 Zourong Road Central District Chongqing 400010, China Tel: +86 23 6369 1500 Fax: +86 23 6369 1525 Email: chongqing.consular@fco.gov.uk

EMBASSY OF THE PEOPLE’S REPUBLIC OF CHINA Economic and Commercial Counsellor's Office Cleveland Court, 1-3 Leinster Gardens London, W2 6DP Tel: 020 7262 0253 Email: press@chinese-embassy.org.uk Web: www.moftec.gov.cn

BRITISH CONSULATE-GENERAL (PO Box 528) No. 1 Supreme Court Road Central Hong Kong Tel: +852 2901 3000 Fax: +852 2901 3066 Email: commercial@britishconsulate.org.hk Web: www.britishconsulate.org.hk

BRITISH TRADE AND CULTURAL OFFICE 8-10 Floor Fu Key Building 99 Jen Ai Road, Section 2 Taipei, 100, Taiwan Tel: +886 2 2192 7000 Fax: +886 2 2394 8673 Email: info@btco.org.tw Website: www.btco.org.tw

THE BRITISH CHAMBER OF COMMERCE, BEIJING The British Centre Room 1001, China Life Tower 16 Chaoyangmenwai Avenue Beijing 100020, China Tel: +86 10 8525 1111 Fax: +86 10 8525 1100 Email: admin@pek.bricham.org Web: www.pek.britcham.org

THE BRITISH CHAMBER OF COMMERCE, SHANGHAI Unit 1703 Westgate Tower 1038 Nanjing Xi Lu Shanghai 200041, China Tel: +86 21 6218 5022 Fax: +86 21 6218 5066 Email: admin@sha.britcham.org Web: www.sha.britcham.org

THE BRITISH CHAMBER OF COMMERCE, GUANGDONG 1206, 17/F Guangdong International Hotel 339 Huanshi Dong Lu Guangzhou 510098, China Tel: +86 20 8331 5013 Fax: +86 20 8331 5016 Email: manager@britchamgd.com Web: www.britchamgd.com

THE BRITISH CHAMBER OF COMMERCE, CHENGDU Room L 7/F Sichuan International Building 206 Shuncheng Avenue, Chengdu Sichuan 610015, China Tel: +86 28 8652 1700 Fax: +86 28 8652 1056 Email: cbbccd@mail.sc.cninfo.net

THE BRITISH CHAMBER OF COMMERCE, WUHAN Room 611 International Trade & Commerce Centre 566 Jianshe Avenue Wuhan 430022, China Tel: +86 27 8577 0989 Fax: +86 27 8577 0991 Email: wahan@cbbc.org.cn

BRITISH CHAMBER OF COMMERCE, HONG KONG Room 1201 Emperor Group Centre, 288 Hennessy Road Wanchai, Hong Kong Tel: +852 2824 2211 Fax: +852 2824 1333 Email: info@britcham.com Web: www.britcham.com

THE BRITISH CHAMBER OF COMMERCE, TAIPEI Suite 805, 8th Floor, 207 Dun Hua North Road, Taipei 105, Taiwan Tel: +886 2 2547 1199 Fax: +886 2 2547 2378 Email: info@bcctaipei.com Website www.bcctaipei.com

expectation of considerable growth in coming years.

Second, in China's western and central regions investment can qualify for preferential tax treatment and qualification is relatively flexible. Third, the old industrial heartlands in the Northeast of the country, with strong manufacturing, raw material processing and agricultural sectors, need significant investment to facilitate technological modernisation. Fourth, the service industry, especially in logistics, operations, skills and training. Outsourcing is increasingly popular due to its efficiency saving and employment creating potential. There is also growing interest among Chinese enterprises in investing overseas and I believe the UK is well placed to take advantage of this.

Economic globalisation is growing at such a pace that market information is constantly changing. It is therefore both necessary and timely for InterTrade Media to update this Market Essentials folder on China. This second edition is a welcome and positive step towards helping businesses in both countries to develop their strengths, realise their potential and help take economic relations between China and Britain to a new high.

© October 2007 - InterTrade Media Limited. All rights reserved.

Photos courtesy of: Dreamstime.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of InterTrade Media Limited. The views expressed in this publication are not necessarily those of the promoters involved. Whilst every effort has been made to ensure that the information in this publication is accurate, InterTrade Media Limited cannot accept any liability for loss or damage arising from facts, errors or omissions. Readers should undertake the usual commercial checks before entering into business arrangements.

InterTrade Media Limited UK, Tel: + 44 161 613 5872, Fax: + 44 161 333 5353, E-mail: info@intertrademedia.com

China

SECOND EDITION

Market Essentials “China is emphatically not a static giant. It is a fast evolving colossus. Trade and investment prospects between the UK and China have never been better.�

Sir William Ehrman, KCMG British Ambassador to China

China