We must not see red over Chinese links

CHAIRMAN Mao’s portrait still looms over Tiananmen Square and a Communist government is about to launch the 13th Five Year Plan.

Beijing, however, bristles with the capitalist spirit, from the neon-lit shopping malls populated by the big Western brand names to the traditional hutong markets.

China’s economy and society are at a tipping point. According to locals and British expats at a business lunch on the 40th floor of one of the gleaming sky-scrapers lining the traffic- clogged boulevards, there is a finite window for UK firms to break in.

Business dealings with China are controversial. Critics cite concerns about human rights and allowing a Communist state to take a stake in our national assets.

But whatever one’s moral or political view, China is undeniably a land of opportunity for UK businesses – for now.

The Chinese used to welcome foreign businesses with open arms. Now they tolerate them. But in five years, say the experts at the lunch table, their economy will be so advanced they won’t need us at all.

For a sense of the scale of potential profits, look no further than Uber, scourge of the London black cabbie. The app is growing at an astounding rate in the People’s Republic. Guangzhou, Hangzhou and Chengdu – three cities of which many in the UK will never have heard – are all bigger than New York in terms of Uber trips, which are running at a million a day across China.

The country is bypassing credit cards and traditional banks and moving straight to online payment systems such as AliPay, run by China’s internet market place Alibaba. Business innovation is running ahead of the authorities’ ability to regulate. If you want to see a living laboratory for the future of commerce, come to Beijing.

There are 1bn consumers, 527m mobile internet users and 332m online shoppers.

Companies such as Aviva, which has had a joint venture with consumer goods giant Cofco since 2003, are tapping into demand from an emerging middle class with an appetite for healthcare products, insurance, financial services.

This summer’s volatility on the share and currency markets are seen here in the context of a much longer term and bigger game.

The goal of the 13th Five Year Plan is a ‘ moderately prosperous society’ by 2020, which sounds low key until one considers around 70m Chinese still live on a dollar a day or less.

What does it all mean for Britain? Much of the recent focus has been on Chinese investment in the UK, in controversial areas such as the nuclear power industry.

There are also qualms about doing business with China because of the barriers to entering its markets and the cultural divide.

And investing does not come without risks. China’s stock market saw dramatic falls of more than 30pc over the summer. It has since recovered but it looks like the volatility is here to stay with shares down another 6pc in Friday trading.

But the opportunities are immense – and if Britain wants to avoid becoming a backwater economy, we need to look east.

Steeled for decline

FROM the vantage point of Beijing, calls for the European Union to take steps against China dumping steel on world markets would be futile. Cheap Chinese steel has been blamed for the crisis in the UK industry – but if the EU imposes sanctions, observers here argue, it would only make matters worse.

The move would benefit European steel producers at the expense of steel users, such as the car makers, and eventually feed through to higher prices for consumers.

It would also almost certainly lead to retaliation, in the form of tariffs against popular European imports to China, such as luxury goods. Burberry would suffer for the sake of the steel makers.

Better for Britain, the argument goes, to stop wasting its time with steel and to concentrate on exporting things we are good at, such as financial services or high class education – Dulwich College, for example, has outposts in Beijing, Shanghai and Suzhou.

The UK is not the only country going through a shift of this sort. South Korea, whose shipbuilding prowess took its toll on British yards, is now suffering itself: these days, it is a place the Chinese go for plastic surgery, not for oceangoing vessels.

British politicians still could help our steel industry by removing some of the unfair disadvantages it suffers such as heavy green taxes. That does not amount to ‘propping up’, just a level playing field.

Help to those who have lost their jobs needs to be increased, in recognition that transitions of this kind are painful.

Steelworkers in Redcar can’t become overnight financial services experts, any more than a South Korean shipbuilder could give you a nose job.