In January of this year, the Dong Feng (East Wind) train arrived at Barking rail terminal, completing a 7,000 mile plus journey. 17 days previously the freight train had departed from Yiwu City in Zhejiang Province on its maiden UK-China journey.
The East Wind train is the latest manifestation of China’s ambitious Belt and Road Initiative, which aims to revitalise the Silk Road and Maritime Silk Road that once dominated global trade. The Yiwu-Barking route is one of over a dozen new train links opened between China and Europe. Faster than by sea and cheaper than by air, rail freight is opening up new possibilities for businesses.
The first Dong Feng train was packed with £4m worth of consumer goods for its westward journey, an additional contribution to the £40bn of goods and services that China sold to the UK last year. It returned to Yiwu considerably lighter, symptomatic of a trade relationship where the UK only exports around half as much in return (the latest 2015 figure was £19bn of exports in goods and services).
The UK is certainly not the only country to have a hefty trade deficit with China. But if we want to meet our global ambitions this needs addressing. China is changing fast. Visit cities like Shanghai or Shenzhen, all high-rise offices, neon lights and tech-startups and you’ll meet China’s modern generation. They are tech-savvy, globally-educated with international tastes and a large disposable income.
In modern China, 21st Century trade links will be forged through research and development. While much of China’s growth since the 1980s has been fuelled by imitation and low-cost manufacturing, the emphasis is now on innovation. Last year China launched their Made in China 2025 strategy, which aims to shift the emphasis from volume manufacturing to value manufacturing. China is rising up the global innovation rankings and is an early-adopter of new technologies, for example, electronic payment services have become a part of everyday life much sooner than in the West.
China will soon be the world’s largest investor in R&D and is already the UK’s fifth largest partner in terms of academic co-publications. Chinese brands such as Huawei and Alibaba are going global. The car manufacturer Geely, once synonymous with basic domestic cars, now owns Volvo and has taken them from the brink of bankruptcy to record-breaking sales in seven years. Geely also owns the London Taxi Company and has committed to invest £300m in a new West Midlands factory. Intellectual property frameworks are being strengthened accordingly to support this environment. UK companies should no longer view China as being synonymous with cheap manufacturing but as an environment where they can collaborate with world leading companies.
This presents new opportunities for UK advanced manufacturing; for example, China is now the world’s largest market for electric vehicles. Advances in Artificial Intelligence, led by tech companies like Tencent and Baidu, and R&D by automotive manufacturers such as GAC and Shanghai Auto are making breakthroughs in connected and autonomous vehicle technology. In the skies, Comac recently launched the first Chinese-built passenger jet. Earlier this month I joined 10 leading Edinburgh Professors at the first Comac-Edinburgh Innovation Week, which aims to identify new research projects.
The Science and Innovation Network (SIN) is helping UK companies to connect with this landscape, from initial research, through innovation and product development, to entry into the market. We have been supporting the Newton Fund that connects UK and Chinese researchers since its inception. We are also working with Innovate UK on a series of regional innovation competitions (the latest, with Guangdong Province, is open here).
Last year, the UK was Country of Honour at the Pujiang Innovation Forum and brought a large delegation of scientists and entrepreneurs to Shanghai. This year SIN is working in partnership with the Department of International Trade as the UK takes centre-stage once again at the China International Industrial Fair (CIIF).
CIIF is a huge trade event focusing on sectors such as Aerospace, Automotive, ICT and Robotics. It is an example of the intersection between scientific innovation and commerce, with sub-forums focused on emerging industries, future cities and autonomous vehicles. As Country of Honour the UK will play a leading role in these activities, including arranging a forum on how the UK can participate in the Made in China 2025 strategy.
The Chinese market can be tough. The language barrier, distance and complex regulations present unique challenges. But they can be overcome. More and more UK companies are setting up in China and other nations, most notably the Germans, have enjoyed much success. If your company is interested in getting involved in CIIF please get in contact. My team can be contacted at sin.shanghai@fco.gov.uk and DIT can be contacted at commercial.shanghai@fco.gov.uk.