China’s expansion boosting business on Teesside
Mar 4 2008 by Sue Scott, Evening Gazette
“In China, people are very commercial. Everybody wants to be a millionaire,” says Wen Cai, the Chinese-born, Middlesbrough-based md of business introduction service UK-China Connex.
And with the world’s eyes on Beijing as it prepares for the 26th Olympic games this summer, a fair few of the 1.3bn of them may achieve their ambition.
The country’s spectacular sprint up the global economic league table has not only pulled the Chinese proletariat up by its boot strings, swelling the average pay packet by 13.5% in four years, but it’s also sent a wad of yuan in Teesside’s direction.
Sales for the North-east region are forecast to top as much as £200m for 2007 - order books for the first three quarters swelled to £170.5m, putting China 11th in the league table for exports from the Tees Valley.
Although still only 2.5% of North-east exports overall, business behind the bamboo curtain is booming for some sectors in particular. China’s energy hungry economy swallowed some 21% of all power generating machinery and equipment sent overseas, and companies including Cummins of Darlington, Elementis in Eaglescliffe and Johnson Matthew at Billingham all credit the dragon economy with having boosted profits this year.
Meanwhile, a number of firms, including Haanai Cables of Hartlepool, who’ve joined recent trade missions with UK Trade and Investment, are considering expanding into the market.
Demand for low emission engines to power environmentally friendly buses around the Olympics’ highly charged political arena helped push exports of engines from Cummins’ plant to 17,000 in 2007 and boosted the workforce on Teesside by more than 700, contributing to what plant manager Tim Millwood described as an “amazing year”.
Meanwhile, orders for narrow bodied aircraft to satisfy China’s booming domestic travel industry has similarly fuelled Darchem Engineering’s expansion at Stillington, which has seen a steady ebb of trade away from the US towards the strengthening economies of the East.
It’s a trend that, given America’s precarious economic position, others would do well to follow.
Now worth more than £4.7bn to the UK economy, China prefers to pursue its business relationship with the West through joint ventures, says UK Trade and Investment’s advisor in the North-east Dr Zhengming Yang.
“There are more than 4,000 British joint ventures with Chinese firms and 400 new deals every year,” says Yang. The UK is one of the largest foreign investors in China, with more than 5,480 British-backed projects on the books by the end of March 2007.
But after a decade of exploitation by Europeans, which used China as a cheap factory floor, the government is wary of deals that don’t match the country’s aspirations to be regarded as a sophisticated, respected world economic power. The Chinese are now interested in our minds as much as our wallets, says Yang.
“They have the technology, but they want to advance it. They are not happy to copy, they want innovation. R&D is key. In the future they don’t just want it to read ‘made in China’ but ‘designed in China’,” says Yang.
And in return for intellectual investment by the West, local companies benefit from cheaper manufacturing and raw material costs, he adds - although for how much longer is another question.
Nigel Rogers, CEO of Stadium Group based in Hartlepool, believes rising inflation and skills in Far East and Asian markets have put an end to the days of “lift and shift” manufacturing.
“In the 1990s, UK manufacturing output in Asian and Far East markets increased as more UK companies looked to take advantage of cheaper costs,” he says.
“However, the pendulum has started swinging the other way and companies that outsourced their entire UK manufacturing capability are now having to contend with rising wages and inflation in Asian markets. The days when everything is made overseas and shipped back to the UK are numbered.”
Yang agrees. “Wages in Shanghai and Guangzhou have increased dramatically in the past 10 years,” he says.
With the east and south now prospering, the Chinese government is looking to open up vast swathes of the country’s big industrial belts to foreign firms.
This May, Yang will lead a North-east business delegation to Zhengzhou and Wuhan in central China, home to much of the country’s automotive, steel and energy plants, where labour and materials may come cheap, but transport and logistics are dear, as the country struggles with huge infrastructure projects. “China is like one big building site,” says Yang.
The trade mission is well in advance of the Olympic games, on the back of which the Chinese are planning to generate even more business.
Beijing will be humming with deal-makers and for that reason, Wen Cai cautions any firm against the lure of the East in August. China, she says, is crowded enough as it is.
