United Kingdom and China

Lord Haskel Excerpts

Thursday 7th November 2013 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I am most grateful to the noble Lord, Lord Dobbs, for initiating this debate because it brings back many happy memories. When China announced the open-door policy in 1978, I was an early businessman to go there. I sold the Chinese the equipment and technology to make some of my firm’s textile products and carry out some of our processes so that they could supply markets that were closed to us in the UK. So began my business association with China, which lasted many years.

I loved going to China. The Chinese proudly took us to the technological wonders, so graphically described by the noble Lord, Lord Kirkham. They also patiently explained calligraphy, Beijing opera and Chinese art. In the philosophical exchange called for by the right reverend Prelate, they came here. The night before they went home, we always gave them a farewell dinner at the Reform Club. There was a lot of interest in this luxurious form of people’s commune. All this helped create the personal relationships so important in getting things done in China. This is because you never really know who is in charge, at any level. The Communist Party maintains its monopoly on power by control of the economy and access to it.

So I was interested when the London Mayor and Chancellor announced their successful business deals in China last month. The Chinese press reported that business had been done because the Prime Minister had admitted that he had mishandled or misunderstood Tibet. Here, some commentators ranging from the Observer to the FT interpreted the business resulting from this visit as kowtowing to the Chinese; I am sure that the Minister saw these reports in the papers himself. Maybe that is true, but to me it looked rather like desperate salesmen doing reckless deals to achieve their quotas. Indeed, the signs are there: the Chancellor announced measures to make it easier for Chinese banks to operate in London by opening branches that are regulated from Shanghai rather than subsidiaries regulated in London. This is exactly what helped to precipitate the crisis in 2008 and, as the noble Lord, Lord Dobbs, mentioned, we said, “Never again”. Of course, if Chinese financial rules are reformed, it would be good for the City to have a bank clearing Chinese currency in London—but at the cost of bending our new banking regulations?

It was also announced that two Chinese state-owned nuclear power companies will take a 30% to 40% stake in Hinkley Point. Once again the Government are taking money and then depending on regulators to ensure tough scrutiny over security, safety, investment and financial issues, a concept not well understood or adhered to in China. And do the British public have faith in this concept? I doubt it, after their recent experience with the banking regulators, the energy regulators, the care quality regulators and the water regulators—I could go on.

Parliament itself has criticised the system of regulation in place to oversee Huawei’s operation here and its equipment that is now part of our digital network. I am all for an open economy and Britain being open for business, but there is a line between openness and recklessness. We must be very careful not to surrender our ability to operate and compete in important sectors of industry. Sectors where we have strengths, such as space, must not be sacrificed on the altar of inward investment. This is why we have to be sure that we are operating the right business model. If we have contractors for crucial sectors of our infrastructure that make it easy for us and make promises, as the noble Lord, Lord Howell, explained, there is little redress when things go wrong, and revoking such contracts is very expensive to us. There is always the temptation to hide these errors because politicians do not want to be embarrassed.

In this era of globalisation, our relations with China in business are complicated. The modern supply chain is so involved that it is almost impossible to track. You do not know if firms are trading with themselves or at arm’s length. The harmonisation of standards is virtually impossible, and this means the careful mutual recognition of regulation. This applies as much to intellectual property rights and data protection as to trade in goods and services.

All this makes dispute resolution highly complicated. Remember, too, that foreign companies in China are sometimes singled out for investigation or state-led smear campaigns simply because they are foreign. This is why we must have a reciprocal relationship with China, not a dependent one, a point made by the noble Baroness, Lady Neville-Rolfe, in her excellent maiden speech, and bilateral co-operation rather than reckless dependency—one of engagement, as the noble Lord, Lord Dobbs, put it. These are all pressures on our business relations with China. We have to think them through properly before doing more deals that we may come to regret.

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[Baroness Wheatcroft (Con)]

My Lords, I add my congratulations to my noble friend Lord Dobbs on securing this important debate and leading it so skilfully. I also applaud the two insightful and interesting maiden speeches we have heard today. I look forward to hearing more from both our new Members.

This is an auspicious day for such a debate. For today, the first ship will enter Britain’s new port, London Gateway. This remarkable deep-water facility will be able to handle 3.5 million containers a year and is just 20 miles down the Thames from London. Earlier this year, the Prime Minister described it as “an emblem of ambition”. So it should be, but I was struck that all the coverage of this new port referred to the imports that will be landing at London Gateway, many of them from China. However, the plan must not be that these ships will leave London empty. London Gateway should indeed be an emblem of the ambition Britain has to build its exports. There is no more inviting market than China.

As we have already heard, our performance has improved markedly. Last year was the third in a row in which our sales to China increased faster than those of Germany, France or Italy, but from a relatively low base. We are still too far behind. Yet, as my noble friend Lady Neville-Rolfe said, there is an appetite in China for British-made goods. Jaguar Land Rover, for instance, sold a record 73,347 vehicles in China last year, an increase of 74% over the previous year. Burberry has been selling its style in China for 20 years and last year Church’s shoes—a brand not unknown to Members of this House—opened its first shop in China.

These are all high-quality brands and we have many more of them. This summer, I was one of those fortunate to attend a wonderful event in the gardens of Buckingham Palace. This was no ordinary garden party but an opportunity for royal warrant holders to display their wares. From sausages to silverware and cosmetics to clothing, the best of British was on show. As potential buyers from abroad looked at what was on offer, the Queen and Prince Philip toured the exhibition, doing their best to boost the sales effort. Ten years ago, the idea of a trade fair at Buckingham Palace, with Her Majesty taking on the role of head of sales, would have been unthinkable. Now, however, Britain is really serious about bolstering its export effort. We had a prime example last month, to which many noble Lords have already referred, with the Chancellor of the Exchequer’s hugely successful visit to China.

At this point—and I am glad to see the noble Lord, Lord Haskel, in his seat—I admit to an interest as a member of the UK advisory board of Huawei, a telecoms company which is playing a major role in the infrastructure of this country and is one of the fastest-growing companies in the world. Huawei is demonstrating ably how the UK and China can co-operate. It is investing more than £1 billion in the UK, including creating a new research and development centre in London. It is also taking on apprentices and doing its best to foster trading between our two countries, taking students to spend time in China and bringing them back here so that what they have learnt can be expanded.

As the noble Baroness, Lady Dean, said, our larger businesses know how to access overseas markets but the imperative now is to ensure that our smaller businesses take advantage of export opportunities. Small high-tech companies which I have never heard of accompanied the Chancellor on his last visit to China, such as games developer Fat Pebble, and Kinosis, which apparently shows surgeons how they can operate via a mobile phone app; I am not entirely comfortable with that, but let us hope that it works.

Trade missions are just the start. Government help should not stop when they land back at Heathrow—and it is, of course, Heathrow. We have not always been good at providing the follow-up necessary to turn contacts into contracts. I am glad to say that this is improving, and credit for that goes largely to my noble friend Lord Green of Hurstpierpoint; we shall miss him.

While encouraging exports, we need to do all we can to persuade increasingly wealthy Chinese to spend their money here. Tourism, as other noble Lords have said, is crucial. The changes in the visa restrictions shall help. However, there are other things we can do. How many retailers and hotels accept Union Pay, the credit card of choice in China and a network second only to Visa in its reach? We should make it as easy as possible for wealthy Chinese to spend their money. I was fascinated to see how this massive organisation views our country. Its website has a small section on the UK which begins:

“Located in Western Europe, United Kingdom is an island country on the Atlantic Ocean … Scotland in the north is a mountainous area flush with cattle and sheep; England in the south boasts enchanting natural sceneries and Wales in the west is famous for rugged mountain ridges and green stream valleys”.

It goes on in a similar, lyrical vein but not, perhaps, portraying the vibrant, creative place we know. The Olympics showed what we can offer, but we must not rest on our Olympic laurels. The GREAT campaign is doing good work in explaining what is on offer in Britain, but it appears that there are some corners of the world that we still need to reach.

There is still a long way to go in fostering understanding between our two nations. A good start, I would suggest—as I always have—is language. Mandarin is not an easy language to learn but it is easier if one starts early. I was impressed to hear of state schools in Michigan where, from the age of four, children are taught every other day in Mandarin. Total immersion works and is cheap to provide: it simply means hiring primary school teachers whose first language is Mandarin. I would like to think that British children might soon be offered the same opportunity so that they will grow up and become effective exporters for Britain.

[Lord Haskel]

Can the noble Baroness refer to the concerns of Parliament over the regulation of her company? That is the point that I was trying to make.

[Baroness Wheatcroft]

The concern was over the way in which the deal with BT had been constructed. That is highlighted in the report from the security committee. As the noble Lord knows, GCHQ monitors everything that goes on between Huawei and businesses in this country.