Minister Zhou Xiaoming visits the Opto-electronics Technology and Incubation Center at Glyndwr University in Wales. Provided to China Daily

Regional governments in the UK vie with each other to attract Chinese investment

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

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

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

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

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

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

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

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

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

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

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

Another example is EA Technology, which established a representative office in Shanghai in 2009 to sell monitoring devices that detect faults inside power generating machines. It now generates over 1 million pounds ($1.5 million, 1.2 million euros) of sales from China annually, with an ambition for much more, to make the best of China's large energy market.

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

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

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

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

Having heard the aspirations of Flintshire businesses like SmartKem, EA Technology and Comtek, Zhou says that he is more than happy to help. "I knew very little about Flintshire before my visit, but when I came here, I am pleasantly surprised to find the range of advanced manufacturing and technology businesses already operating here. I believe the potential for its cooperation with China is huge," Zhou says.

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

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

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

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

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

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

One example is Essex, a county north-east of London, which signed a friendship agreement with China's Jiangsu Province in 1992, and has since worked with Jiangsu in trade, investment, education and culture.

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

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

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

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

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

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

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

One example is the University of Nottingham, which is helping the Chinese automotive producer Chang'an upgrade its technology. Chang'an has established an R&D center in Nottingham, creating over 60 jobs.

The University of Nottingham's Asia Business Centre is currently working closely with Nottingham City Council to draft the council's China engagement strategy, says a council spokesperson.

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

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

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

As most UK schools require students to register in advance due to capacity restraints, Finney's team worked with local schools to create extra capacity to accommodate the children of Huawei employees. Finney's team also made Huawei a member of its local business forum.

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

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

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

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

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

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

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

(China Daily 04/19/2013 page12)