Yorkshire, just west of Zhejiang...

On the surface (and the map), the old industrial lands of northeast England are a world away from the thrusting new boomtowns of the Chinese coast. But it’s clear they can each learn a lot from each other.

If you want to get something made in China, try going to Hull. Go to the Seabright China Products Centre, and ask sales director Catherine Zheng about a customised supply deal. As wholesale suppliers, her Humberside-based but Chinese-owned company knows the value of close links with its customers. Zheng speaks cheerfully of having learned the hard way - by making mistakes at the outset. For anyone unfamiliar with the UK market, it’s all too easy to get products ever so slightly wrong: either to fall foul of scepticism about the quality of Chinese goods; get caught out on import procedures; or be left out of sync with seasonal demand. All too easy to end up stuck with a container-load of shoes, clothes or gifts that can’t be shifted for love nor money.

Now that she has been up and running at Seabright for a full year, Zheng is keen to give other Chinese companies the benefit of her experience, encouraging them to invest in the UK too. Especially - but not exclusively - if they take her advice about doing it in Hull rather than London.

They don’t even have to come from Zhejiang province - although Zheng herself does - but there are strong links between that part of eastern China and the Yorkshire and Humber region. Regional development agency Yorkshire Forward set up an office two years ago in the provincial capital, Hangzhou, and YF’s international operations manager Jeremy Coupland is hard at work getting it to deliver in terms of inward investment.

Inward investment? Hang on a minute - doesn’t that mean UK companies investing in the booming Chinese economy, rather than the Chinese setting up businesses over here?

China on the Humber
Yes and no. China certainly devours more foreign direct investment than any other country in the world, at a rate of more than $1 billion a week. The Brits are among the largest foreign investors there, involved in over 4,800 projects at the end of 2005. And, at the regional level, YF’s Hangzhou office does a lot of work with the China-Britain Business Council, promoting goods and services from Yorkshire companies, helping them make commercial links and identifying outlets for Yorkshire know-how.

But it’s not quite all one-way traffic. Around 350 Chinese firms have set up in the UK, attracted by the liberalised business structure. So far 17 (mainly in light to medium manufacturing) have come to Yorkshire and Humber, creating about 100 new jobs locally. That’s a useful scattering, but still pretty small beer (less than one-thirtieth of all jobs secured by inward investment). And Coupland admits that none so far are “real quality, highly skilled” ones - though he does detect a growing emphasis on knowledge-driven work, such as specialist ICT.

Interestingly, Catherine Zheng, for all her modern business savvy, makes no explicit reference to the environment; her pitch is all about the price competitiveness and flexibility of getting the manufacturing done in China, plus a promise of smooth order fulfilment, thanks to her grasp of how such things work in the UK.

But this is early days, responds Mike Smith, YF’s head of sustainable development. In time, he’s confident that this growing web of mutual investment can be leveraged to raise employment standards, improve environmental criteria and generally shift its participants - in China and Yorkshire alike - on to a more sustainable path, as each learns from the other.

So what form would those lessons take? Jeremy Coupland argues that Yorkshire’s urban regeneration experience has particular relevance for Zhejiang. He points to “rapid large-scale house building in Hangzhou which has backfired, and could need replacement”. He cites examples of universities at Leeds, Sheffield, York, Hull and Bradford working with their Zhejiang counterparts on problem issues like water treatment. And, says Coupland, there are also plenty of positive lessons from Hangzhou’s achievements in cleaning up its beautiful lake, taking heavy traffic under it by tunnel and promoting its parks to tourists.

Golden hills, green valleys
That mutual learning is set to intensify, thanks to growing contacts between Yorkshire Forward and Zhejiang, whose vice-governor, Zhang Mengjin, is particularly keen on fostering the links. Smith admits it has taken a while to overcome old prejudices and build trust. “For a long time, the Chinese assumed we were telling them not to do things, because it would have an adverse impact on the world. They were suspicious of us and our motives - and not without reason. There are centuries of history of the Brits selling the Chinese down the river. So we had to establish a relationship where it was clear we were friendly advisors - not ‘tellers’.”

“We sat down with [Zhang’s team], and worked out what we had to offer them in the way of expertise. It came down to environmental and energy technologies, plus finanical and legal skills.” But it works both ways. “We’re obviously interested in inward investment,” says Smith, “particularly in the power, chemicals and retail areas” - all of which play to Zhejiang’s strengths.

Meanwhile, the province’s energy needs are soaring. One estimate suggests it will need to build around 30 new coal-fired power stations to meet demand - hardly an appealing prospect for a government increasingly keen on a more sustainable approach. So it’s no surprise that Zhang is particularly interested in learning from Yorkshire and Humber’s explorations in shifting to a low-carbon economy, based around cleaner coal and, eventually hydrogen.

He’s also keen to introduce corporate environmental and social reporting to Zhejiang - another area in which Yorkshire Forward is able to offer expertise. Adam Pritchard, head of YF’s business investment, admits that “from a business development point of view, it is not a target to get European-style working practices adopted in China, because they’re expensive”. But there is a reputational issue, as well as a moral one: for Chinese companies working in an increasingly global marketplace, says Pritchard, there’s “a competitive advantage in being able to bring Western executives into their office working conditions”. Encouragingly, he sees this leading to a general levelling up - not the nightmare “race to the bottom” scenario touted by the diehard opponents of globalisation.

It’s a sentiment echoed by Zhang Mengjin, who told Smith: “We’ve spent the last three years trying to reverse the [negative] impacts of our economic development model. We thought it would give us golden hills, but we’d still somehow keep our green valleys. Now we know that the green valleys are our most important asset.”

Roger East and Martin Wright

2 November 2006

Martin Wright and Roger East