Insider’s Jim Pendrill joined a Liverpool delegation to Shanghai ahead of next year’s World Expo and found a city busy gearing up for the world’s ‘business Olympics’.
Everyone thinks they know China. Hardly surprising really when we read and hear constantly about its unstoppable economic growth, albeit a growth that has not been immune to the global economic maelstrom of the past year.
But it isn’t until you find yourself in the heart of the Gotham-like metropolis of Shanghai, surrounded by the chaos of 20 million other souls, that you really appreciate this country’s scale, and what becoming the world’s largest economy really means.
Take a trip out of the city, as Insider did on a visit to Liverpool University’s campus at Suzhou 80km west of Shanghai, and this bombardment of the senses becomes even more acute. There is barely a patch of grass left between the cities. Instead one city after another is sprouting up in between.
Suzhou is home to five million people, while Liverpool University sits within a giant business park to the south of the city, which is home to another million. But this is only a pinprick. There are nearly 300 cities across China home to more than a million people.
What does all this mean for British business? The obvious answer is potentially quite a lot, not least because relations between the UK and China have never been better. As Ian Crawford, head of the British Chamber of Commerce in Shanghai, says: “There are no negatives on the horizon.”
The growth of his chamber tells its own story. Five years ago it had 250 members, today it has 1,200 as British companies in advanced engineering, design, architecture and professional services flock to China’s east coast to set up operations. In fact, the UK is the largest European investor in China with up to 6,000 projects in the country.
The investment isn’t all one way. The UK is now the second top European destination for Chinese inward investment with nearly 400 Chinese companies having UK operations.
Crawford admits the global downturn punctured the trend a little – inquiries to his office from British companies ground to a halt in the second half of last year. But he thinks it’s the perfect time for UK businesses to reassess their Chinese ambitions.
“All the reasons that were valid for investing in China a year ago are still valid,” he says. “It is still relatively easy to do business here if you compare it with many other parts of the developing world. You are talking about a market of roughly 250 million people with disposable income down the east coast. And don’t forget the language – all Chinese children have to learn English.”
Not that China isn’t without its pitfalls. One of the biggest issues is the need to study the Chinese market and adapt products accordingly. “Too many companies think they can just replicate what they do in the UK,” says Crawford. It can take up to six months to get a business licence, while hiring quality staff and IP rights are also issues, although Crawford adds that more cases of infringement are now brought by Chinese companies than by Western ones.
The relationship between Liverpool and Shanghai typifies the positive links between China and the UK. In the West the concept of twinned cities is regarded as a political nicety. Not so in China, where twinning can deliver real economic benefits. The roots of Liverpool’s presence at next year’s Expo lay in the city’s twinning relationship with Shanghai, which began a decade ago.
Bob Shead is a veteran on doing business in China, having been based in Shanghai for the past 11 years and is chiefly involved with trade and investment for the British Consulate. He says: “China looks at twinning as a commercial opportunity. When the mayor of Liverpool comes to Shanghai he will get a meeting with the mayor here.”
Liverpool really stepped up its links with China by forming the Liverpool Shanghai Partnership (LSP) a few years ago. The LSP’s office in Shanghai is a crucial link as Liverpool gears up for the Expo, and an invaluable point of entry for any North West business entering the Chinese market.
However, taking up the invitation to host a pavilion at Expo required a big leap of faith among Liverpool’s leaders, particularly given the £1.5m-plus cost. But Liverpool realised the Expo was a great way of attracting more Chinese students into the city. And with 70 million visitors expected to attend there were benefits to the North West tourist economy besides the inward investment opportunities.
The result is that Liverpool is the only UK city apart from London with a presence at Expo, and many in this region will wonder why Manchester hasn’t got involved. However, with the Northwest Regional Development Agency (NWDA) pumping £1.25m into the project it can be argued that Manchester doesn’t need to, especially as one of Liverpool’s aims will be to position the city as the gateway to the wider region.
Richard Jeffery, head of international strategy at the NWDA, says the agency will be using Liverpool’s long relationship with Shanghai as a portal to the wider Far East market. “For us Expo is about building on the political relationships that exist and getting more companies in our region thinking about China. But this is also a World Expo and there are opportunities to deal with other countries and cities that will be there.”
Liverpool’s pavillion will sit within the Urban Best Practice Area (UBPA), which is a new departure for the World Expo as it is the first time there has been an area dedicated to the promotion of cities rather than just countries.
Xu Wei, official Expo media spokesman, says the event – and especially the UBPA – is all about showing Chinese people how property development can improve lives. “Without Expo I do not think Shanghai can really be an international city,” he says. “What makes places like London great is its mix of cultures; its different architecture. The Expo gives Chinese people a chance to see that.”
Xu says he is personally encouraging state officials from across China to visit Expo for the same reason: “We want them to then go back to their states and decide how they want to develop their own cities.”
China, epitomised by the development of Shanghai, has huge development and planning issues. As its economy becomes more urbanised, issues remain over how it is developing its cities.
As Oliver Hayakawa, LSP’s chief representative in Shanghai, says: “The tradition in China is to build modern and new, but in Shanghai new regulations have not been implemented as they should have been to protect many buildings of heritage. Liverpool is an example of where heritage has been preserved, and the Chinese know they can learn a lot from the city.”
These questions are being asked at the highest levels. During Insider’s week in Shanghai the most senior official I met was Wang Jianjun, deputy director general of the Public Information Office in Shanghai. Her comments went to the heart of what Expo means to the Chinese.
“Expo is a good chance for us to learn from overseas as countries bring with them ideas, especially as Chinese citizens do not have much chance to go abroad,” she says. “The world has witnessed the fast growth of our economy but China faces big challenges. Inland, most places are poor and people lack electricity and tap water. Their dream is to live in cities, but big cities have problems, particularly in terms of balancing urban living and the environment.”
The Expo site represents a microcosm of these wider issues. To make way for the site the city has knocked down and redeveloped a major part of its city centre, straddling both sides of the Huangpu river – land that used to be home to the Shanghai Shipyard as well as a steel factory and power plant, not to mention thousands of workers.
Xu Wei stresses that the whole operation has been beneficial for employers and workers, saying: “Relocating the factories enabled the companies to move into new premises and take advantage of new technologies, and we have moved the people into much better housing.”
From the top of the Lupu bridge, which spans the Huangpu river at the Expo site, the sheer scale of the site can be understood – it stretches for miles in both directions. On the western Shanghai side of the river one can see the outline of the UBPA, while on the other side work is under way on the country pavillions, alongside new conference venues.
The only event of comparable scale would be an Olympics. Just like Beijing last year, Shanghai has spent years getting ready for the Expo, uprooting the city and spending millions on its infrastructure. Hayakawa says the same pride the Chinese had in the Olympics will be evident at Expo: “The Chinese had a very successful Olympics and they want to replicate that success again.”
But how will success be measured for Liverpool? It’s a tough question to answer and one that probably won’t be known for many years. In the meantime all Liverpool can do i s maximise the opportunity.
Hayakawa stresses that it’s the five per cent of non-Chinese Expo visitors who may hold the key. “One of the great pluses of the event for Liverpool and the North West will be getting to meet business leaders from other cities and city regions, as well as major multinationals that will have their own pavillions,” he says. “The trade benefits are massive if Liverpool talks to the right people.”
Also in: July 2009
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On top of all the challenges facing business at the moment, getting on a plane and going to China might seem like an exercise in indulgence, but it isn’t.
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