News - Midlands
COVER STORY Full of Eastern Promise
Full of Eastern promise?
[Is now the right time for corporates to be thinking about that major tie-up with China or have they missed the boat? Kevin Gopal investigates, while below he assesses whether Rover's Chinese adventure will ever come to pass - and whether it will be enough to save the company.
It used to be that when America sneezed the rest of the world caught a cold but for many Midlands businesses today it's the health of China that will have them reaching for the tissues.
Whether it's seen as a source of cheap components, a juicy market in its own right or a low-cost threat to manufacturing, China cannot be ignored. And even if businesses are not directly affected by China in some way, the country of 1.2 billion people is so large that it shapes the macro-economic climate in which they operate.
In the macro-economic sphere, China's huge demand for steel has pushed up world prices such that they are wiping out margins for some engineering firms, reports Bob Watson, chief executive of the Engineering Employers' Federation's (EEF) East Midlands branch. "Consumers in the UK won't swallow more costs. Our members cannot pass on the prices increases," he says.
On the other hand, cheap Chinese imports into the UK have contributed to the climate of low inflation enjoyed by the region's businesses. It is one of the hallmarks of globalisation that assessments of opportunity and threat are never simple.
Such a complex reality is most keenly felt in the Midlands' automotive sector, where Shanghai Automotive's takeover of MG Rover, if it goes ahead, is likely to save jobs in the medium term but could eventually result in the design and development of cars moving east.
And though it remains a trickle, there are signs that other Chinese companies are considering investment in the Midlands. The East Midlands trade mission that has just returned from China, for example, hopes its visit to the Beijing headquarters of Asimco will have bolstered the plans of China's largest independent manufacturer of component parts to set up a 3,000-5,000 sq ft sales and management office in Leicestershire. Asimco had already expressed its interest in opening the initially modest facility to service existing and potential customers from the UK and Europe. The West Midlands is also trying to get in on the act. Regional development agency Advantage West Midlands is planning a series of seminars to boost awareness in the cities of China's east coast in the new year.
But it is in the other direction that most investment flows, with many UK manufacturers having set up joint ventures - or on their own - as World Trade Organisation membership forces China to relax its corporate regulatory environment. At its most basic, the rationale is then to re-export those products back for use in domestic markets.
But many experts warn that this opportunity won't last forever. Ian Heslegrave, a director at Deloitte in Birmingham, returned earlier this year from Shanghai, where he spent two years developing the firm's tax practice. He warns that the preferential corporate tax rates extended to overseas companies, as well as some of the additional tax breaks given to manufacturers, are due to come to an end. And VAT applies to exports from this year as well.
Added to these costs, says Heslegrave, is the possibility of a revaluation of the Chinese currency, the renminbi, following pressure from the US government. "The Chinese government has resisted this pressure. But many observers believe a 5 per cent upward revaluation of the renminbi is coming - although it might be in two steps over two years. That means goods out of China will become more expensive," says Heslegrave.
Another tax specialist, Jason Glester, partner at Ernst & Young, adds that Midlands companies in China must ensure compliance with a tighter environment on transfer pricing. "Companies must ensure they are not trying to artificially push profits into low tax regimes. The transfer pricing knowledge of Chinese fiscal authorities is increasing," he says.
Midlands companies can still make substantial savings from manufacturing for domestic markets in China but for all these reasons - and the fact that wages in China are rising, albeit from a very low rate - the major opportunity lies in selling to the Chinese market. "There is a middle class of 250 million people in China," says Nick Matthews, principal fellow at Warwick Manufacturing Group, the manufacturing centre of excellence that itself is running its full range of courses as well as conducting R&D at a new centre near Suzhou, opened in June this year in collaboration with Malaysian firm EduTech Management. "There is huge business to be had there for British companies prepared to spend the time," he says.
The question then is whether to export or to set up manufacturing in China. Valve Train Components, the small supplier of engine components, has had considerable success in picking up work from Volkswagen in China as well as Chinese engine manufacturers from its Lichfield base (see right). But Matthews adds: "If you want to be a global player you have got to have an operation in East Asia. First-tier component manufacturers may have to think about this."
Even in automotive, where Midlands companies have the quality and competitiveness to compete for work successfully, the picture is not straightforward - between 2001 and 2003 car sales in China more than doubled but there has been a sharp downturn in the market since July of this year.
Farah Baksh, business development manager for the RSM Robson Rhodes' national manufacturing group, says car prices have been falling in China due to Beijing's banking regulators limiting car loans in a bid to prevent the economy from overheating. "But that is not dampening down enthusiasm by the world's leading carmakers from investing into what is clearly the fastest and most profitable car market in the world. Car suppliers must link up with a Chinese car maker," she says.
Other sectors also present opportunities for Midlands companies blessed with design expertise and technical excellence. Although it would be a mistake to believe that Chinese manufacturing is low quality because it is low cost, Chinese industry still lacks R&D skills and technical prowess.
West Midlands forging companies are doing exceptionally well in China, says Ian Smith, chief executive of EEF West Midlands, because of an acknowledgement that their products are better. There is a large incentive for such companies to get involved in the lucrative process of modernising China's ageing industrial infrastructure, adds Heslegrave, because of changes in the system that will soon allow some businesses in China to recover VAT on capital spending. "There is a general impetus to businesses in China to modernise and re-equip. We have got to make the most of it."
The smarter Midlands companies, large and small, are already aware of this. Atherstone company Profab Access, which produces acoustic, fire retardant and other metal access panels, mainly for the construction industry, has picked up considerable business in China despite being only four years old.
Following a trip to Hong Kong with the Coventry and Warwickshire Chamber of Commerce, the company appointed a Hong Kong sales agent and won orders from the region including Hong Kong's new Disneyland project and the Sands casino in Macau, as well from the mainland.
At the other end of the scale, Midlands corporate IMI wants to increase its revenues from China from 2 per cent of its total to 10 per cent after chief executive Martin Lamb went to Shenzen at the start of the year and was said to be "stunned by the rate of growth". IMI, which makes products including valves for oil refineries and drinks dispensers for fast-food restaurants, is considering opening a second factory in China.
The opportunities in China are by no means limited to engineering. Mike Whitby, leader of Birmingham City Council, who has recently returned from leading a civic and trade delegation to Guangzhou, is urging construction companies to step up to the breach. "The construction programme there is awesome," says Whitby. "Birmingham construction companies are more than welcome to tender, even if they have to syndicate to do so."
Luxury goods are another area where Midlands companies have had some success over the years, according to UK Trade and Industry. And there may be opportunities for Midlands retailers to follow the example of B&Q and Ikea now WTO membership has forced China to open up its retail market and more and more Chinese people are buying their own apartments.
Eventually, as China builds its manufacturing capacity, it will start to move up the value chain, acquiring the technical prowess needed for its industrial development and the design and marketing skills needed to satisfy its increasingly worldly-wise middle class. The best option for the Midlands is to help it do so by training its people.
WMG is pleased to be training China's engineers of the future when there are around 20 universities in the area. The University of Nottingham was the first UK university with an overseas branch when it opened in Malaysia in 2000 and now is the first into China with a £340m campus in Ningbo, in the province of Zhejiang on China's eastern coast.
And following Birmingham's delegation to Guangzhou, it is aiming to increase the number of Chinese students in the city. There are currently 2,100 Chinese students in Birmingham, contributing £328m to the local economy, "many of whom have gone on to greater things", points out Whitby. Following a memorandum of understanding between the leaders of Birmingham and Guangzhou the aim is to increase that number to 5,000.
The benefits to the local economy in the short term are clear. In the longer term, says Whitby, Birmingham businesses may be able to establish useful relationships with Birmingham-educated Chinese people and by extension with companies. It's part of a sophisticated approach that acknowledges China as a formidable reality, says Whitby, but seeks to take advantage of it. "We are now seen as a partner to Guangzhou. It's up to our entrepreneurs to work out what it means."
Doing business in the far east
Not a done deal
Shanghai Automotive Industry Corporation's (SAIC) proposed joint venture with MG Rover illustrates the growing global ambitions of Chinese corporates. But is this really the deal that can save MG?
Although the deal (which appears far from signed and sealed) between MG Rover and SAIC has been presented in the UK as a lifeline for Britain's last volume car maker, analysts in Eastern Asia are questioning what's in it for SAIC.
MG Rover hit the media with some gusto when first announcing the plans - Shanghai Automotive would invest £31bn for a 70 per cent stake in the beleagured company, screamed the headlines, allowing MG Rover to come with a much-needed new range of cars for the mid-market.
The deal also had the backing of trade unions, which hoped that the 6,000 jobs at Longbridge and the further 10,000 in the Midlands supply chain said to depend on them might be a little more secure.
The company's future depended on it, said chairman John Towers, even if his personal future, following revelations about payments into a pension fund, didn't.
But events since then suggest that Rover executives may be regretting the enthusiasm with which they took to the media. First they were forced to row back from the claim that the deal would secure Longbridge.
Far from being a source of investment for new models in the west, said MG Rover sources, Shanghai was paying for 70 per cent of a Shanghai-based joint venture based on co-operation on design and development. It was clear that this could help SAIC access the design skills and technology needed to boost sales in China and set it on its way to meet its ambition to be the world's sixth largest car maker. But what were the benefits for Rover?
Matters turned worse when SAIC executives slapped down MG Rover for proclaiming a done deal even though the Chinese government had yet to approve it. And then Ratan Tata, head of Tata Motors, MG Rover's Indian partner, raised his fears about the SAIC tie-up.
MG Rover sells Tata cars in the UK under the City Rover brand and Tata said MG Rover's tie-up with SAIC could jeopardise that deal.
He told the Sunday Times: "To be very frank, we do not know what the extent is of their engagement with SAIC. They have been less than forthcoming themselves. I would say that if their engagement is really a fully fledged engagement then I would have no doubt that we will move to a second or third level of involvement, which is tantamount to saying there is no engagement at all."
MG Rover executives have moved to play down these fears but they add to concerns that the SAIC deal will not be Longbridge's saviour. If SAIC doesn't want to build cars in Birmingham - and why should it? - and MG Rover doesn't get its new range more quickly, the deal looks, in the words of one observer, "like a marriage of celibates".
There is little doubt that MG Rover needs saving. November was one of its best months for sales for some time - but sales were still dropping month by month. And in a Lords debate, one of the Midlands' most ardent manufacturing champions, Lord Bhattacharyya, founder of the Warwick Manufacturing Group at Warwick University, laid into MG Rover management.
"MG Rover at Longbridge struggles to sell technologically redundant products," he said. "The difference in performance is not a function of investment in plant or workers, which are pretty much the same. The difference is the ability of managers to absorb the latest technology and develop exciting new products," said Lord Bhattacharyya.
Whether SAIC is to be saviour remains to be seen. The Chinese company is planning a float, possibly on both the New York and Hong Kong stock exchanges, and though Chinese companies may be new to shareholder capitalism they are not immune to its hubris.
In remarks relayed across the world by the newswires, Jia Xingguang, chief analyst with China National Automobile Industry Consulting and Development, said the deal won't bring SAIC its own design skills and technology, its own brands or the capital it needs for further expansion. He pointed out SAIC's obligation to maintain investment in its existing joint ventures with Volkswagen and General Motors, which power sales in China - a car market whose recent downturn is as dramatic as its previous growth.
Doing business in the far east
Can-do attitude pays dividends
Lichfield-based Valve Train Components is one of few first-tier automotive suppliers in the UK to have a truly global customer base
Employing only around 30 people, Valve Train Components supplies valve collets to every major continent and has a 14 per cent share of the world market. Customers include VW, General Motors and Ford.
The company completed its global full house with a plan formulated nearly two years ago to enter the Chinese market. Simply by "getting off our backsides and doing it", as sales director Gary Brereton puts it, Valve Train Components won business from VW in China and a number of independent car and engine manufacturers.
"Doing it" meant visiting China alone, not with trade missions. Brereton says he was "staggered" to find that Valve Train Components was the only western company exhibiting at Guangzhou's largest automotive show.
Ninety-five per cent of the company's products are exported - winning it a Queen's Award this year - and Asia now represents 9 per cent of that. Selling in China has brought "a substantial increase in business".
Brereton says the company is now talking to a number of other European companies that have manufacturing operations in China, and it is also designing a new product for an independent Chinese engine manufacturer. "Looking over the next three years I think China could represent at least 20 per cent of export sales."
Valve Train Components makes 300 million parts a year and was the Midlands winner in the Parcelforce Worldwide Small Business Awards last month. Brereton believes that companies such as Valve Train Components show that UK manufacturing need not roll over in the face of competition from China - as long as British firms adopt a positive attitude and go and find business.
"It's not the case that UK manufacturing must die. China is crying out for engineering excellence," he says.
Brereton acknowledges that intellectual property protection can be a problem in China but Valve Train Components' strategy of only exporting to China, not manufacturing there, means its products are harder to copy.
"Mainstream companies have said to us that they won't have our product manufactured in China and that's music to our ears," says Brereton, adding that the company has no plans to set up manufacturing in China in the future, despite the views of many automotive commentators who believe all first-tier suppliers with global aspirations must have manufacturing operations in all major territories.
The import duty of up to 25 per cent imposed by the Chinese authorities can be a stumbling block, he admits, but, perhaps surprisingly, Valve Train Components can actually command slightly higher prices in China than it can in Europe because of Chinese customers' willingness to pay for quality.
Struck by the fact that it encountered "not one negative reaction" in China, and that Chinese customers asked it to introduce other UK manufacturers to them, the company is now setting up a spin-off consultancy to do just this. "We are looking to help manufacturers of components, initially in automotive, with contacts in China," says Brereton.
[Is now the right time for corporates to be thinking about that major tie-up with China or have they missed the boat? Kevin Gopal investigates, while below he assesses whether Rover's Chinese adventure will ever come to pass - and whether it will be enough to save the company.
It used to be that when America sneezed the rest of the world caught a cold but for many Midlands businesses today it's the health of China that will have them reaching for the tissues.
Whether it's seen as a source of cheap components, a juicy market in its own right or a low-cost threat to manufacturing, China cannot be ignored. And even if businesses are not directly affected by China in some way, the country of 1.2 billion people is so large that it shapes the macro-economic climate in which they operate.
In the macro-economic sphere, China's huge demand for steel has pushed up world prices such that they are wiping out margins for some engineering firms, reports Bob Watson, chief executive of the Engineering Employers' Federation's (EEF) East Midlands branch. "Consumers in the UK won't swallow more costs. Our members cannot pass on the prices increases," he says.
On the other hand, cheap Chinese imports into the UK have contributed to the climate of low inflation enjoyed by the region's businesses. It is one of the hallmarks of globalisation that assessments of opportunity and threat are never simple.
Such a complex reality is most keenly felt in the Midlands' automotive sector, where Shanghai Automotive's takeover of MG Rover, if it goes ahead, is likely to save jobs in the medium term but could eventually result in the design and development of cars moving east.
And though it remains a trickle, there are signs that other Chinese companies are considering investment in the Midlands. The East Midlands trade mission that has just returned from China, for example, hopes its visit to the Beijing headquarters of Asimco will have bolstered the plans of China's largest independent manufacturer of component parts to set up a 3,000-5,000 sq ft sales and management office in Leicestershire. Asimco had already expressed its interest in opening the initially modest facility to service existing and potential customers from the UK and Europe. The West Midlands is also trying to get in on the act. Regional development agency Advantage West Midlands is planning a series of seminars to boost awareness in the cities of China's east coast in the new year.
But it is in the other direction that most investment flows, with many UK manufacturers having set up joint ventures - or on their own - as World Trade Organisation membership forces China to relax its corporate regulatory environment. At its most basic, the rationale is then to re-export those products back for use in domestic markets.
But many experts warn that this opportunity won't last forever. Ian Heslegrave, a director at Deloitte in Birmingham, returned earlier this year from Shanghai, where he spent two years developing the firm's tax practice. He warns that the preferential corporate tax rates extended to overseas companies, as well as some of the additional tax breaks given to manufacturers, are due to come to an end. And VAT applies to exports from this year as well.
Added to these costs, says Heslegrave, is the possibility of a revaluation of the Chinese currency, the renminbi, following pressure from the US government. "The Chinese government has resisted this pressure. But many observers believe a 5 per cent upward revaluation of the renminbi is coming - although it might be in two steps over two years. That means goods out of China will become more expensive," says Heslegrave.
Another tax specialist, Jason Glester, partner at Ernst & Young, adds that Midlands companies in China must ensure compliance with a tighter environment on transfer pricing. "Companies must ensure they are not trying to artificially push profits into low tax regimes. The transfer pricing knowledge of Chinese fiscal authorities is increasing," he says.
Midlands companies can still make substantial savings from manufacturing for domestic markets in China but for all these reasons - and the fact that wages in China are rising, albeit from a very low rate - the major opportunity lies in selling to the Chinese market. "There is a middle class of 250 million people in China," says Nick Matthews, principal fellow at Warwick Manufacturing Group, the manufacturing centre of excellence that itself is running its full range of courses as well as conducting R&D at a new centre near Suzhou, opened in June this year in collaboration with Malaysian firm EduTech Management. "There is huge business to be had there for British companies prepared to spend the time," he says.
The question then is whether to export or to set up manufacturing in China. Valve Train Components, the small supplier of engine components, has had considerable success in picking up work from Volkswagen in China as well as Chinese engine manufacturers from its Lichfield base (see right). But Matthews adds: "If you want to be a global player you have got to have an operation in East Asia. First-tier component manufacturers may have to think about this."
Even in automotive, where Midlands companies have the quality and competitiveness to compete for work successfully, the picture is not straightforward - between 2001 and 2003 car sales in China more than doubled but there has been a sharp downturn in the market since July of this year.
Farah Baksh, business development manager for the RSM Robson Rhodes' national manufacturing group, says car prices have been falling in China due to Beijing's banking regulators limiting car loans in a bid to prevent the economy from overheating. "But that is not dampening down enthusiasm by the world's leading carmakers from investing into what is clearly the fastest and most profitable car market in the world. Car suppliers must link up with a Chinese car maker," she says.
Other sectors also present opportunities for Midlands companies blessed with design expertise and technical excellence. Although it would be a mistake to believe that Chinese manufacturing is low quality because it is low cost, Chinese industry still lacks R&D skills and technical prowess.
West Midlands forging companies are doing exceptionally well in China, says Ian Smith, chief executive of EEF West Midlands, because of an acknowledgement that their products are better. There is a large incentive for such companies to get involved in the lucrative process of modernising China's ageing industrial infrastructure, adds Heslegrave, because of changes in the system that will soon allow some businesses in China to recover VAT on capital spending. "There is a general impetus to businesses in China to modernise and re-equip. We have got to make the most of it."
The smarter Midlands companies, large and small, are already aware of this. Atherstone company Profab Access, which produces acoustic, fire retardant and other metal access panels, mainly for the construction industry, has picked up considerable business in China despite being only four years old.
Following a trip to Hong Kong with the Coventry and Warwickshire Chamber of Commerce, the company appointed a Hong Kong sales agent and won orders from the region including Hong Kong's new Disneyland project and the Sands casino in Macau, as well from the mainland.
At the other end of the scale, Midlands corporate IMI wants to increase its revenues from China from 2 per cent of its total to 10 per cent after chief executive Martin Lamb went to Shenzen at the start of the year and was said to be "stunned by the rate of growth". IMI, which makes products including valves for oil refineries and drinks dispensers for fast-food restaurants, is considering opening a second factory in China.
The opportunities in China are by no means limited to engineering. Mike Whitby, leader of Birmingham City Council, who has recently returned from leading a civic and trade delegation to Guangzhou, is urging construction companies to step up to the breach. "The construction programme there is awesome," says Whitby. "Birmingham construction companies are more than welcome to tender, even if they have to syndicate to do so."
Luxury goods are another area where Midlands companies have had some success over the years, according to UK Trade and Industry. And there may be opportunities for Midlands retailers to follow the example of B&Q and Ikea now WTO membership has forced China to open up its retail market and more and more Chinese people are buying their own apartments.
Eventually, as China builds its manufacturing capacity, it will start to move up the value chain, acquiring the technical prowess needed for its industrial development and the design and marketing skills needed to satisfy its increasingly worldly-wise middle class. The best option for the Midlands is to help it do so by training its people.
WMG is pleased to be training China's engineers of the future when there are around 20 universities in the area. The University of Nottingham was the first UK university with an overseas branch when it opened in Malaysia in 2000 and now is the first into China with a £340m campus in Ningbo, in the province of Zhejiang on China's eastern coast.
And following Birmingham's delegation to Guangzhou, it is aiming to increase the number of Chinese students in the city. There are currently 2,100 Chinese students in Birmingham, contributing £328m to the local economy, "many of whom have gone on to greater things", points out Whitby. Following a memorandum of understanding between the leaders of Birmingham and Guangzhou the aim is to increase that number to 5,000.
The benefits to the local economy in the short term are clear. In the longer term, says Whitby, Birmingham businesses may be able to establish useful relationships with Birmingham-educated Chinese people and by extension with companies. It's part of a sophisticated approach that acknowledges China as a formidable reality, says Whitby, but seeks to take advantage of it. "We are now seen as a partner to Guangzhou. It's up to our entrepreneurs to work out what it means."
Doing business in the far east
Not a done deal
Shanghai Automotive Industry Corporation's (SAIC) proposed joint venture with MG Rover illustrates the growing global ambitions of Chinese corporates. But is this really the deal that can save MG?
Although the deal (which appears far from signed and sealed) between MG Rover and SAIC has been presented in the UK as a lifeline for Britain's last volume car maker, analysts in Eastern Asia are questioning what's in it for SAIC.
MG Rover hit the media with some gusto when first announcing the plans - Shanghai Automotive would invest £31bn for a 70 per cent stake in the beleagured company, screamed the headlines, allowing MG Rover to come with a much-needed new range of cars for the mid-market.
The deal also had the backing of trade unions, which hoped that the 6,000 jobs at Longbridge and the further 10,000 in the Midlands supply chain said to depend on them might be a little more secure.
The company's future depended on it, said chairman John Towers, even if his personal future, following revelations about payments into a pension fund, didn't.
But events since then suggest that Rover executives may be regretting the enthusiasm with which they took to the media. First they were forced to row back from the claim that the deal would secure Longbridge.
Far from being a source of investment for new models in the west, said MG Rover sources, Shanghai was paying for 70 per cent of a Shanghai-based joint venture based on co-operation on design and development. It was clear that this could help SAIC access the design skills and technology needed to boost sales in China and set it on its way to meet its ambition to be the world's sixth largest car maker. But what were the benefits for Rover?
Matters turned worse when SAIC executives slapped down MG Rover for proclaiming a done deal even though the Chinese government had yet to approve it. And then Ratan Tata, head of Tata Motors, MG Rover's Indian partner, raised his fears about the SAIC tie-up.
MG Rover sells Tata cars in the UK under the City Rover brand and Tata said MG Rover's tie-up with SAIC could jeopardise that deal.
He told the Sunday Times: "To be very frank, we do not know what the extent is of their engagement with SAIC. They have been less than forthcoming themselves. I would say that if their engagement is really a fully fledged engagement then I would have no doubt that we will move to a second or third level of involvement, which is tantamount to saying there is no engagement at all."
MG Rover executives have moved to play down these fears but they add to concerns that the SAIC deal will not be Longbridge's saviour. If SAIC doesn't want to build cars in Birmingham - and why should it? - and MG Rover doesn't get its new range more quickly, the deal looks, in the words of one observer, "like a marriage of celibates".
There is little doubt that MG Rover needs saving. November was one of its best months for sales for some time - but sales were still dropping month by month. And in a Lords debate, one of the Midlands' most ardent manufacturing champions, Lord Bhattacharyya, founder of the Warwick Manufacturing Group at Warwick University, laid into MG Rover management.
"MG Rover at Longbridge struggles to sell technologically redundant products," he said. "The difference in performance is not a function of investment in plant or workers, which are pretty much the same. The difference is the ability of managers to absorb the latest technology and develop exciting new products," said Lord Bhattacharyya.
Whether SAIC is to be saviour remains to be seen. The Chinese company is planning a float, possibly on both the New York and Hong Kong stock exchanges, and though Chinese companies may be new to shareholder capitalism they are not immune to its hubris.
In remarks relayed across the world by the newswires, Jia Xingguang, chief analyst with China National Automobile Industry Consulting and Development, said the deal won't bring SAIC its own design skills and technology, its own brands or the capital it needs for further expansion. He pointed out SAIC's obligation to maintain investment in its existing joint ventures with Volkswagen and General Motors, which power sales in China - a car market whose recent downturn is as dramatic as its previous growth.
Doing business in the far east
Can-do attitude pays dividends
Lichfield-based Valve Train Components is one of few first-tier automotive suppliers in the UK to have a truly global customer base
Employing only around 30 people, Valve Train Components supplies valve collets to every major continent and has a 14 per cent share of the world market. Customers include VW, General Motors and Ford.
The company completed its global full house with a plan formulated nearly two years ago to enter the Chinese market. Simply by "getting off our backsides and doing it", as sales director Gary Brereton puts it, Valve Train Components won business from VW in China and a number of independent car and engine manufacturers.
"Doing it" meant visiting China alone, not with trade missions. Brereton says he was "staggered" to find that Valve Train Components was the only western company exhibiting at Guangzhou's largest automotive show.
Ninety-five per cent of the company's products are exported - winning it a Queen's Award this year - and Asia now represents 9 per cent of that. Selling in China has brought "a substantial increase in business".
Brereton says the company is now talking to a number of other European companies that have manufacturing operations in China, and it is also designing a new product for an independent Chinese engine manufacturer. "Looking over the next three years I think China could represent at least 20 per cent of export sales."
Valve Train Components makes 300 million parts a year and was the Midlands winner in the Parcelforce Worldwide Small Business Awards last month. Brereton believes that companies such as Valve Train Components show that UK manufacturing need not roll over in the face of competition from China - as long as British firms adopt a positive attitude and go and find business.
"It's not the case that UK manufacturing must die. China is crying out for engineering excellence," he says.
Brereton acknowledges that intellectual property protection can be a problem in China but Valve Train Components' strategy of only exporting to China, not manufacturing there, means its products are harder to copy.
"Mainstream companies have said to us that they won't have our product manufactured in China and that's music to our ears," says Brereton, adding that the company has no plans to set up manufacturing in China in the future, despite the views of many automotive commentators who believe all first-tier suppliers with global aspirations must have manufacturing operations in all major territories.
The import duty of up to 25 per cent imposed by the Chinese authorities can be a stumbling block, he admits, but, perhaps surprisingly, Valve Train Components can actually command slightly higher prices in China than it can in Europe because of Chinese customers' willingness to pay for quality.
Struck by the fact that it encountered "not one negative reaction" in China, and that Chinese customers asked it to introduce other UK manufacturers to them, the company is now setting up a spin-off consultancy to do just this. "We are looking to help manufacturers of components, initially in automotive, with contacts in China," says Brereton.