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United Kingdom and China — Motion to Take Note

– in the House of Lords at 11:45 am on 7th November 2013.

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Moved by Lord Dobbs

To move that this House takes note of the recent developments in the relationship between the United Kingdom and China.

Photo of Lord Dobbs Lord Dobbs Conservative 11:46 am, 7th November 2013

My Lords, I first express my appreciation to the House and its authorities for the opportunity to promote the debate—and, indeed, to all noble Lords who are here today. It is also a very pleasant duty to extend a warm welcome to the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Whitby, both of whom will be gracing the debate with their maiden speeches. On behalf of us all, I wish them nothing but fulfilment during their time in this place. I also declare my interest as a board member of Conservative Friends of the Chinese, but I do not wish to turn this into a partisan debate. It has been too long since we had the chance to debate these hugely important issues.

China is the world’s most populous country, with one-fifth of all humanity’s children, the second biggest economy on the planet and the largest standing army. We keep talking about Chinas as an emerging nation, but China is not emerging: she has already arrived, an ever-strengthening wind in our world. My own interest in China dates from my doctoral studies at the Fletcher School of Law and Diplomacy in the 1970s when China was in the throes of the Maoist madness that killed, murdered and even starved to death tens of millions of Chinese. China today is unrecognisable as that delta of misery which flooded into the Yellow Sea. The first thing I do, therefore, is offer my unstinting congratulations to the people and the Government of China for the enormous strides that they have taken since then.

Britain’s relations with China are long-standing, although they have not always been good. Our imperial past has left many scars; the Chinese still remember. However, both our worlds have moved on since those inauspicious days. Our economic ties have expanded enormously. In the past three years, British exports to China have doubled, although they are still less than those of France, way behind Germany and only a squeak more than Italy. Our trade deficit with China is far larger than those of our European neighbours. On the other hand, our financial services industry is a world leader. The plans to turn London into a major hub for renminbi dealing are truly exciting. What draws so much attention is the flow of Chinese investment into Britain. It includes investment into Heathrow and Manchester airports, our new nuclear power plants, the Lloyds building, the Royal Albert Dock, Thames Water, good old Weetabix, our next-generation telephone and broadband systems, and even London’s traditional black cabs. It is an arrangement of mutual advantage: they send us cuddly pandas and, in return, we send them Boris.

If we intend to strengthen our economic links with China, as we should, we need to give attention to many areas. I will highlight three. The first is that of visas. In the past three years, the Government have been making it easier for Chinese businessmen and tourists to come to Britain. All the required paperwork is now available in Mandarin, making the process of getting a visa much less onerous. George Osborne, in his remarkable trip to Beijing last month, promised even further improvements. We must, however, put those promises into action. Seven times as many Chinese visitors go to France as to Britain. There is more to be done.

My second point relates to our air links. We are going to have to work a lot harder to make sure we are competitive with the rest of Europe. We wring our hands about whether it should be Boris Island, Heathrow’s third runway, Stansted or Birmingham—yet, while we argue rather than implement, the Chinese just get on with it and increasingly fly to mainland Europe. We have been awful at our planning of airports policy. We need to get much better, and very quickly.

Thirdly, I will say a few words about education—that vital bridge not just between businesses but between cultures. We are by far the most popular destination in Europe for Chinese students and the third most popular in the world after the United States and Australia, yet we do far too little in return. At state-school level, only a tiny fraction of pupils are offered any education in Mandarin. The situation is improving, but far too slowly. At university level, we have only around 400 graduates a year who get any training in Chinese. The situation at postgraduate level is even more challenging. The British Association for Chinese Studies reports that, in the past four years, Britain has produced only 13 doctoral students covering all Asian studies—all Asian studies, not just Chinese studies. Noble Lords might be interested to know that the comparable figure for Celtic studies is 19. As delighted as I am that we rejoice in our Celtic roots, I think we need to dig rather deeper than that.

There are those who are fearful of our growing contacts. They are worried about the extent of Chinese hacking and industrial espionage, the theft of intellectual property, the inadequacies of Chinese commercial law, and the corruption that is endemic. There is no point in pretending that everything is as it should be. We still need to do business with not only our wallets but our eyes open.

Our relations with China stretch far wider than trade and commerce. The continued progress of China is key to the stability of the rest of the world, and she faces huge domestic challenges. China has the most rapidly ageing population in the world. Her workforce is about to start shrinking rapidly. The failures of the one-child policy are coming home to roost. It is said of China that she will be old before she is rich. Like so much of Asia, China is desperately short of energy and raw materials. However, her biggest challenge is perhaps the shortage of water. Much of it is polluted, unsuitable not simply for human use but even for agriculture and industry. I will give one statistic. The water table in Beijing has dropped 300 metres—a full 1,000 feet—since the 1970s. All this matters to us because China is far too large a part of our world to be ignored.

When China sneezes, the rest of the world catches cold. We talk glibly about China being monolithic—one country politically, economically and geographically—but that can be hugely misleading. China is confronted by immense internal challenges, and many observers believe that the most significant story of the next 20 years will not be the story of her inexorable rise but of her growing domestic problems. There will be rifts between the generations, the regions, the religions, the haves and have-nots, the literally wets and dries, between opposing ideas and conflicting needs.

The country’s interior is still one of the most backward parts of the planet. Some 400 million Chinese are desperately impoverished and have gained nothing from the great economic awakening. It is said that a rising tide will float every boat, but what happens when the water runs out? There are also ongoing and deep-seated concerns about human rights—of which I suspect we will hear more in this debate.

Of course, there is a new leadership in Beijing. From the speeches of Xi Jinping and Li Keqiang, it is clear that they understand the magnitude of the challenge they face. We should wish them well, for China at discord could be no friend of the West, let alone a partner in our future prosperity. This is where I want to leave my personal mark on this debate. Although in many eyes the rise of China is a threat to the West, I argue that the greatest threat comes not from China’s expansion but from the possibility of her implosion. That would cast a shadow over the world so intense that it would propel us into an ice age that would make our recent economic troubles seem like an outing on an iceberg. To borrow a phrase from Henry Kissinger’s recent book on China,

“no issue preoccupies Chinese leaders more than the preservation of national unity”.

To understand that point is to understand much about current Chinese policy.

If we criticise Chinese inflexibility towards Tibet, for instance, we should at least understand their genuine fear that unrest in Tibet will be followed by upheaval in Xixiang and other border regions, and then perhaps throughout the entire country. To some, it is an extraordinary concept that China could be a vulnerable member of the international community. It is a particularly odd idea when we see China becoming more assertive. She has border disputes with Japan, India, Vietnam and the Philippines. Her army is mighty and she is flexing her muscles. American academics talk of a new cold war as the United States pivots away from Europe and towards Asia, and as China increasingly joins forces with Russia. The seeds for future conflict exist; they could all too easily be sown.

Yet, inevitably, and happily, there is another side to all this. China has shown little appetite for external aggression. Many of these border issues are left over from the centuries of humiliation, and many of the disputes are about rocks and oil and, in the long tradition of Asian politics, about face. Very often the Chinese have found an accommodation. For instance, many feared that Hong Kong would be destroyed after it was handed back, but Beijing has been true to its word and handled our former colony rather like a precious Ming vase. We should not blind ourselves or be complacent; we must realise that the growth of China will inevitably create the need for change. Through that, it will create also the potential for conflict. She is already developing a more assertive foreign policy; she will insist on being involved in a dialogue over the future not just of border regions such as North Korea and Pakistan but of places further afield, such as Syria—as we have seen—the wider Middle East and Africa. The tectonic plates of our world are shifting.

But this is not a zero-sum game in which they win and we lose. We have our differences, but we also both have an overriding interest in stability. We need to develop a strategy of engagement with China—engagement, not appeasement—that is capable of recognising China’s legitimate requirements, making them compatible with our own and finding common purpose in the search for stability. We need to show an open hand rather than a narrow mind.

Britain has a huge amount to offer China in this process of change. It is not simply the economic stuff but our goods and financial services, our expertise in health care and our great creativity. We even have our history to offer. Britain was an exception to the rule that industrial revolution is inevitably followed by political revolution. All across Europe, crowns tumbled and thrones were toppled while, in Britain, we kept our traditions and our political system remained largely intact. China would like to learn from that example. It is perhaps ironic that the reflections of Edmund Burke on the proper order of things are probably read more widely in China than they are in Britain.

There is no need to be overawed on account of our much smaller size. Of course, Beijing had a brilliant Olympics; but, when it came to our turn, it was not just Mo Farah who showed the rest of the world a clean pair of heels; it was our entire country. It was Britain at her best.

Our traditions, our culture, our great British brand, our willingness to be open for business, the recent increase in British diplomatic staff in China, our top-level government visits—all of these, and many more, put us in an exceptional position to form fruitful partnerships with China. There is more to do, of course, but, if a journey of a thousand miles begins with a single step, the well of happiness starts being filled with the first drop of understanding.

The red eye of the digital dragon is staring at me, so I must wind up. I apologise for trying to cover hundreds of years of history and billions of pounds’ worth of interests in a single gallop. It has been a privilege of introduce this debate; now it will be my pleasure to listen and to learn.

Photo of Baroness Warwick of Undercliffe Baroness Warwick of Undercliffe Labour 12:01 pm, 7th November 2013

My Lords, I read the enormously encouraging reports of the Chancellor’s recent visit to China, and the serendipitously timed special China edition of The House Magazine indicating how much the Government are doing, so I hope that the Minister, in replying to this debate, will seek to be equally positive in his response to noble Lords’ questions today.

I want to focus my remarks on the strength of the relationship between universities in Britain and China. In doing so, I declare an interest as a member of the Council of University College London which has, itself, extensive links with China. This House has, on many occasions, debated the importance of universities’ international links to the UK economy. We know that international students in higher education contribute about £10 billion a year to the UK economy, and that universities have been frustrated by the apparent failure of the Government to understand fully the opportunities and competitive threats they face in this sphere.

I exempt the Minister from this, because he, as much as anyone in the Government, has sought to point out these opportunities and support universities in their international activities. He has taken a more nuanced approach to visa policy, which recognises the value of international students and higher education trade links. In view of his forthcoming retirement from the Front Bench, I should like to take this opportunity to congratulate him on the part he has played in this and perhaps also take the opportunity to wish him a happy birthday.

The strength and depth of UK university engagement with China is already considerable. We have heard from other noble Lords about some of the partnerships and joint ventures between UK universities and their Chinese counterparts. My university, UCL, has built close collaborative links with the Chinese Academy of Sciences and has, for example, developed the concept of a joint science and innovation platform. It has become evident that academic-industrial partnerships in China can enhance relevance, trust and impact of collaboration, thus increasing trade volume and sustainability.

The demand for higher education in China is staggering and the pace of expansion is difficult to comprehend. But the focus of university partnerships is on research links and innovation as well as teaching. For example, the Innovation UK China partnership brings together five UK and 20 Chinese universities to promote joint innovation, knowledge transfer and commercialisation of intellectual property. I hope that the Minister will urge UK universities to work in concert to attract the very best talent from China for training, exchange and collaborative work. Currently, the UK attracts fewer of the very best students from China than does the US. The UK receives 70% of the number of Chinese students compared with the US, but produces only 20% of high quality, joint publications. Will the Minister look into joint scholarships for top talent with the China Scholarship Council to attract the best young people from both our countries? Meanwhile, the UK-China Partners in Education programme focuses on promoting the exchange of students between the two countries, supports vocational education, raises school standards and aims to encourage more UK pupils to learn Mandarin.

These links and partnerships put the UK in an excellent position to foster close and productive links which will provide enormous long-term benefits to both countries. The UK is in a leading position and we should do all we can to preserve it. The opportunities are considerable, but this is not just about money. We have an opportunity to play a role in shaping the future leaders of China. Universities are acutely aware of the ethical challenge of partnership and investment in a country where corruption and the abuse of human rights remain stubborn features. Does the Minister believe that the UK Government should give advice and support to UK universities as they look to build on their engagement in China? How can we help them avoid the pitfalls of investment and partnerships which could compromise their own ethical standards?

I turn to the well worn subject of international students. The Government often point to the recent rapid growth in numbers of students from China as evidence that there is no problem with the competitive position of UK universities internationally. They should not be so complacent. This rapid growth masks a 3% decrease in non-EU students from other countries. The strong representation of Chinese students on UK university campuses is welcome, adding enormously to the experience of UK students but, privately, some universities worry about the extent of our reliance on one country, particularly given recent evidence of how volatile the international student market can be. You have only to look at our second largest source of international students—India—to see what the problem is. The number of students from India fell by 32% in 2011-12. That has particularly hit engineering, technology and computer science departments and has played a large role in the decrease in postgraduate taught enrolments. India has strong, active media which pick up the negative political rhetoric and increasing visa hurdles in the UK to an amazing extent. This is, for now, less true of China, but the growth of social media is changing that.

Meanwhile, competition is intensifying, particularly from Australia, which is back from the brink following its own experiment in tightening visa rules. If we want to preserve our position, we need the Government to stop being complacent about the UK’s international competitiveness and change visa policy to reflect the value that a diverse and growing international student body brings to the UK. Therefore, will the Minister say whether he will continue to argue for a favourable visa policy? This House will shortly debate the Immigration Bill, which contains yet more provisions likely to deter international students. I hope that the Minister will commit to finding ways to minimise the impact of that Bill on universities. In anticipation of the Prime Minister’s forthcoming visit to China, will he undertake to work with universities to increase opportunities for UK students to study in China, for example, by supporting a postgraduate scholarship programme on behalf of the UK? Finally, will he ask the Home Secretary to look again at the detailed university enrolment figures and reconsider the inclusion of students in the net migration target?

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat 12:08 pm, 7th November 2013

My Lords, I first declare my interests as deputy chair of the All-Party China Group, a partner of DLA Piper and chair of its China desk, a former member of Huawei’s international advisory council and a council member of UCL. It is with great pleasure that I follow the noble Baroness, Lady Warwick, as I agree almost entirely with her comments, derived from her expert knowledge of the higher education sector.

I warmly congratulate the noble Lord, Lord Dobbs, on initiating this debate. He set out the issues extremely well. I look forward to hearing our two maiden speakers later in the debate. I also look forward to the winding-up speech of my noble friend Lord Green who has been such a great champion of trade with China during his time as Trade Minister. We will be sad to see him go.

This debate is extremely timely. We have the opening of the EU-China trade negotiations on 21 November; on Friday we have the very significant opening of the third plenum in China; it comes in the aftermath of a whole series of official visits last month, including the so-called “yin and yang” Boris and Osborne visits and we have the visit of the Prime Minister later on this year or at the beginning of the next. It is noticeable that, despite the hitherto frosty relations with the new Chinese leadership in the 18 months running up to those ministerial visits, major inward Chinese investment has been at record levels over the past year. We are now the top European destination for Chinese inward investment and the noble Lord, Lord Dobbs, mentioned a number of those very significant inward investment levels. In that period, record levels of trade have also been set between China and the UK: in April this year, Britain’s monthly exports to China hit the £1 billion level for the first time. As we heard from the noble Lord, Lord Dobbs, we also have an agreement on renminbi trading in London, which will be of considerable significance.

I have made 30 or so visits to mainland China over the years. Having accompanied my noble friend Lord Sassoon, the new chairman of the CBBC, in his recent handover visit in September and taken part, last month, in a visit to Shanghai by the China All-Party Group, I am absolutely convinced that the prospects for trade and investment both ways between China and the UK are now better than they have ever been. This partly derives from the Chinese Government’s 12th five-year plan which involves a comprehensive strategy towards a more consumer-led economy: a more environmental and energy-conscious economy where the services—insurance, pensions, health and education—and the private sector become much more important, especially with China’s rising middle class.

This is, of course, not to say that China does not have major challenges to overcome, which all impact on the overriding Chinese public policy: the need for stability. The noble Lord, Lord Dobbs, set all these out extremely well. However, both the plan and the challenges give us substantial opportunities here in the UK. The all-party group visit last month gave me considerable reason to believe that we can take advantage of some of the welcome new initiatives such as the Shanghai pilot free trade zone and the Qianhai special economic zone, particularly in the provision of professional, financial and consulting services.

We also have a great deal to contribute in our creative industries. As we know, Britain has a great reputation—particularly following last year’s Olympics—in architecture, design, fashion, film, animation, games, television, advertising, publishing and music. We have a great opportunity for creative and artistic partnership between China and the UK, typified by the success of Thomas Heatherwick’s UK pavilion at the Shanghai Expo in 2010. In the automotive field, brands such as Jaguar and Bentley are experiencing record success. In fact, JLR’s sales in China are now higher than they are in the UK. China is leapfrogging the West in many areas of environmental sustainability. Its need for green growth provides an important market for UK goods and services.

In all this, as the all-party group heard from a whole variety of successful and well established British companies in Shanghai, we need to stay ahead of the game if we wish to compete effectively in China. China is increasingly moving from licensing western intellectual property, know-how and technology to developing its own, so British companies need to keep innovating to stay successful. We also need to focus on those areas where we can demonstrate efficiencies and better use of resources. However, for our trade and investment to keep forging ahead, we need SMEs to have greater self-confidence in entering the Chinese market. We really do need to get this message home to UK SMEs and help them with expert advisory services through UKTI, chambers of commerce and trade bodies and, especially, through local authorities. There is no doubt, for instance, that setting up close twinning relationships between Chinese and UK towns and cities can be of great benefit to business, if done in the right way. I am currently reading an interesting study, recently published by Carl-Johan Carlstedt and Christopher Georgiou on twinning opportunities, which will work if we get the structures of our local government right. However, there is often an imbalance between the Chinese and UK twinning partners. Consider the different population sizes of Shanghai and Liverpool. Whether we have local enterprise partnerships or some of the new initiatives that are being taken, we need to make sure that our structures are suitably matched when we are twinning with Chinese cities.

Quite apart from the value in itself of building bridges, we need to build bridges in areas such as education and tourism. We need visitors to this country to experience what Britain is like, which will help them to create those links that are often of great benefit for business. I am thinking in particular of the alumni programmes that some of our universities are putting in place with Chinese students, whether as undergraduates or postgraduates.

That brings me finally to the question of visas, mentioned by the noble Baroness, Lady Warwick. We need to get our visa regime right. We need to give out the right signals to Chinese students by excluding them from the migration figures. I have no doubt that during the course of this debate we will hear further on that subject.

Photo of Lord Howell of Guildford Lord Howell of Guildford Chair, Soft Power Committee 12:16 pm, 7th November 2013

My Lords, like my noble friend Lord Clement-Jones, I congratulate my noble friend Lord Dobbs on his extremely eloquent opening to this important debate, and I look forward greatly to the two maiden speeches to come.

I am going to suggest that the main focus of our concerns should be not just on the straightforward bilateral relationship between the UK and China, and not just at governmental level—although that context is extremely important. However, the plain fact is that China now operates all around the world in a polycentric manner, and our interface with Chinese activity and development needs also to be polycentric, not just at government level but at all the soft-power levels, between people, professions and organisations—and particularly in education, which is why the point made by the noble Baroness, Lady Warwick, was so valid. Educational links are extremely important at every level, including right down to primary level, at which connections can be made via the internet every morning.

On the economic side, China is now the main trading partner of many of the most influential economies in both the developed and so-called developing world. As the noble Lord, Lord Dobbs, reminded us, those adjectives are rather out of date. China has become the most sought-after source of capital. Countries, including ours, do not just wait for China to come calling but actively seek out and court Chinese investment.

China now funds foreign Governments, underwrites or donates schools and hospitals, and pays for and constructs massive infrastructure projects throughout several continents. That often makes China, for the recipient country, a considerably more attractive and easier investor to deal with than the World Bank.

China has a major impact on both west and east Africa. On the European scene, the Chinese are active in Warsaw and other capitals in working out how to develop shale gas, among other resources. They are very active in Latin America and Australia—with which they now have a huge trading partnership—and throughout the Indian sub-continent, particularly in Pakistan and Myanmar. The Chinese are building a colossal base at Gwadar in Pakistan and huge ports at Chittagong in Bangladesh and Hambantota in Sri Lanka. I say almost in passing that they are sending to the next Commonwealth Heads of Government Meeting in Colombo next week 100 delegates in order to involve themselves in business in that region. It sometimes seems as if the Indian Ocean, rather than the Atlantic Ocean, is becoming the main area of a new pattern and centre of world trade. Indeed, it is forming itself into a sort of maritime version of the old Silk Road—although that, too, is very active.

On the financial side, China now purchases global resources in such huge volumes that it has become the commodity price setter and key influence on markets. It is feeling its way to establishing the renminbi as a rival currency to the dollar, experimenting in Hong Kong and now coming into London, which is extremely welcome and good for us—as long as there is no discrimination with other foreign banks in the City of London. China has a stockpile of $3.5 trillion in foreign currency reserves. These are enormous figures.

On the energy and climate side, China’s appetite for energy resources and its own path towards a new energy pattern will frankly be decisive on all of us, regardless of our own policies. It is the world’s biggest coal importer, the world’s biggest oil importer and the world’s biggest emitter of carbon dioxide. It is building rows and rows of new coal-fired stations—not necessarily CCS-enabled, but very much more efficient than the old ones—and a large number of new nuclear stations. It has massive wind farm investments, although I put “investments” in inverted commas because there is not much evidence that they are paying their way or even being used; however, they are on a very large scale. It is buying up oil, gas and coal concessions around the world. It claims, so the Energy Minister there told me, to have more shale gas than the United States; but I am told that the geology is difficult and there is the problem, to which my noble friend Lord Dobbs rightly drew attention, that it may lack adequate water resources. On the nuclear side, of course, China will now be involved in our own nuclear fleet replacement programme, beginning with Hinkley Point, although I shall feel a bit more reassured when I see the money actually arrive.

On the social and political side, Chinese aid and investment around the world help development, but in some cases they bolster despotic regimes and aid states bent on violence and anti-democratic programmes. We need to show the Chinese, in our dialogue with them, that those moves are against their own interests. They affect the great cities of China just as much as they affect our country.

On the international and foreign policy side, China wants to be a world power of a kind, but if it is to be one, it will have to accept responsibilities at a greater level than hitherto on the global stage. After all, it imports 50% of its oil from Iran and Saudi Arabia, but one has to ask just where China is on Middle East issues, on Iran’s nuclear issue and on Syria and chemical weapons. Quite often, the Chinese seem outright detached or just negative.

China has limited territorial expansion plans. As we know, it regards Tibet and Taiwan as unquestionably part of China. It does, however, allow Hong Kong amazing freedom, including its own currency and representation in international bodies including parts of the Commonwealth, which is all very good for us in the UK. China is now aggressive towards Japan, which is regrettable; their two countries are vastly interwoven in trade terms and together add up to about 18% of the world’s GNP, so it is utterly in our interest to see that they settle quarrels like the Senkaku Islands. Moreover, China is still very prickly on questions of human rights and governance values.

We can work with this fantastic worldwide spread of activity; we can work with it constructively and we can advise about involvement in Africa, perhaps leading to a rather happier course because of our long experience. When I speak to my Chinese friends, they say, “Well, we are very big—a billion or more in population”. I tell them that we are very big as well; we are the Commonwealth with 2 billion or more and therefore we can speak to each other on equal terms. We should do that.

Photo of Baroness Valentine Baroness Valentine Crossbench 12:23 pm, 7th November 2013

Our economic relationship with China is often presented in terms of imports and exports. However, as chief executive of London First—a business membership organisation that helped to create the UK China Visa Alliance—I know that this fails to capture the extent of the connection. Many UK organisations do business with China in less obvious ways. Arup is advising on construction projects, Prospects is helping Chinese entrepreneurs to set up English language schools, universities such as UCL, as we heard earlier, are opening Far Eastern campuses so that Chinese students can benefit from our world-class education and, of course, as the Minister well knows, Hong Kong is a thriving financial centre with strong links to the UK through our historic association. London is the lead location for Chinese investment, while in Manchester the £800 million cash injection into “Airport City” by a Beijing investor will make it one of the country’s biggest construction projects since the Olympic Park.

But there remain barriers to our economic relationship, and I follow the noble Lord, Lord Dobbs, by zeroing in on the issues of tourist visas and air links. Before I do so, I add my plea to those of previous speakers for the Government to remove students from the net migration target. The UK is unlikely to become a member of Schengen any time soon. The unwelcome consequence of remaining outside is that would-be visitors to Europe can visit 26 countries on one visa but have to apply for an additional visa to include the UK on their trip. On top of that, we require them to supply fingerprints, which can mean a round trip of up to 600 miles to one of our application centres. It is small wonder that five times as many Chinese hit the shops on the Champs-Élysées as empty their wallets in the West End. The problem is not that we turn down too many applications, but that not enough potential visitors apply in the first place. The growing Chinese middle class makes up the world’s most valuable and expanding tourist market. Chinese visitors spend more than 60% of their travel budget on shopping, and last year they overtook American shoppers as the world’s biggest purchasers of luxury goods, accounting for 25% of the world market.

To give them credit, the Government are moving in the right direction. Recently they announced a pilot scheme under which some visitors will have to fill in only one form for the two visas. Next year, we expect the Schengen countries to start demanding fingerprints as well, which levels the playing field in one respect, although it is probable that this will make it even less likely that the Chinese will want to go through the hassle twice. I encourage the Government to go further by extending the shared application process to all travellers, and ultimately to collocate visa centres with those of other Schengen countries so that the entire process can be as seamless as possible for our potential high-spending visitors. While on the subject of border enforcement, I also urge the Government to look at reducing immigration queue times at airports. After a long flight, a target queue time of three-quarters of an hour is hardly a welcome.

That leads me neatly on to my next subject. Armed with a visa we need, physically, to get the Chinese to Britain. I do not need to reiterate that the UK is falling behind European competitors in its air connectivity to emerging and high-growth economies. Despite being one of the busiest hub airports in the world, Heathrow is an especially weak link to China. In fact, China is one of the destinations that globally are most frequently accessed from a hub outside the UK. On the other hand, by 2015, China will have spent four years building 82 new airports. We in the UK will be awaiting recommendations that may or may not enable us to build just one new runway in 10 years’ time. How confident is the Minister that when those 82 airports have been built, all those potential flights to the UK will have somewhere to land?

Perhaps I may end by dedicating a limerick to the Secretary of State for Transport and the Home Secretary:

A man on a flight from ShanghaiFound himself wondering whyWith just one Schengen visaHe’d see Paris and PisaBut London, he’d have to pass by.

Photo of Lord Kirkham Lord Kirkham Conservative 12:28 pm, 7th November 2013

My Lords, most of us as consumers or indeed as retailers—a job which I have been doing for over 45 years—have benefited massively from the awesome Chinese economic miracle. The world economy is underpinned by low-cost, high-quality, great-value goods made in China, from kids’ toys to sex toys, from machine tools to motor cars, including 90% of the world’s personal computers, 50% of the world’s ships and 70% of the cell phones. We in the West comfort ourselves with the thought that it is all due to the Far East’s “low-cost” economy, but I venture to suggest that this is not entirely true. I say that not from knowledge derived from reading books, academic research, trawling the internet or taking a brief for this debate but rather from direct, on-the-ground personal experience of transacting business with Chinese companies since 2000. From that I can tell you without caveat or reservation that China is a massively innovative society with a truly phenomenal work ethic, an absolutely determined “can do and will do” attitude and culture and a real commitment to self-improvement.

China’s ascendancy in the global economy is no fluke. When upwardly mobile Chinese acquire surplus renminbi, their first thought is not to study brochures for foreign holidays or flash cars—although China is the biggest and fastest-growing new car market in the world, with almost 20 million vehicles sold last year—no, their priority is to invest in their children's education. That is a bit of good news for us here in the UK because we host around 120,000 or 130,000 fee-paying Chinese students in our colleges. If we did not play so hard to get or make it so hard to get here, there might be even more Chinese participating in that part of our knowledge economy.

The China to which I was introduced a short time ago at the turn of the millennium has entirely vanished. It did so in just 10 years—although we are talking 10 Chinese years, which seems equivalent to about 100 years of development anywhere else on the planet. New China is on track to be the world’s largest economy very soon. The country has evolved at an incredible pace, segueing seamlessly into “brand China”. In 2008, “brand China” gave us the world's biggest and best Olympic Games, arguably until 2012, with its iconic and undeniably brilliant Bird’s Nest stadium and a phenomenal, never-to-be-forgotten opening ceremony. This was a “set the bar” launch advertisement for the brand.

With construction everywhere, China has developed. Just look at the city of Shanghai with its 24 million inhabitants. It has been developed into the Paris of the East: fashionable, stylish, exotic and exciting with its fine stores, restaurants, hotels, houses and apartments. That tremendous civilised backdrop is conducive to networking and transacting business, which is the lifeblood of China. It seems odd and sad that it takes a visit to a nominally communist country to see old-fashioned enterprise in action, enterprise that, through its unstinting investment in infrastructure, has provided tens of thousands of kilometres of highways and expressways and its own high-speed rail network, to support, facilitate and power China's stellar growth. The Beijing to Guangzhou high-speed rail line is the world's longest high-speed line at 2,300 kilometres. It was built in only seven years.

On the topic of railways, when I visited China recently, I was taking the incredible maglev train—that is the magnetic levitation train, no clickety-click metal rails there—from Pudong airport to Shanghai, an eight-minute journey reaching an incredible 431 kilometres per hour. That is around 260 miles per hour. Be assured it was not just low-cost labour that built that space-age mode of transport. It was a real commitment to innovation and the guts to give it a go. It is worth comparing and contrasting that with the umpteen years it has taken us to upgrade our west coast line to achieve half that speed.

China is an unstoppable good news phenomenon: a sophisticated, global-scale investor, exporter, importer and manufacturer of nano-tech, high-tech, low-tech, no-tech, cutting edge mega-demand products. From eyewear to iPhones, China is the class act powering the world's consumerism. In the UK we need to try better to understand the re-emerging—or re-emerged—power that is China, whatever it takes us to do so. We have got to become closer to the world's fastest growing major economy. We must actively and unashamedly encourage Chinese investment, investors, consumers and tourists, welcoming them with open arms. We must make the UK a ravishingly attractive destination, dismantling without delay every conceivable, perceived or real barrier and hurdle to transacting business. We must strengthen established ties and forge the strongest possible trade links. We must act like a friend. Indeed, we must be a friend. Let us not—even remotely—be tentative and ambiguous about it.

We are a trading nation open for business, and the modern-ancient civilisation that is China can make or break us. China's future mega-growth and success will of course create frustrations, stresses and strains, hiccups and bubbles, upsets and challenges. It is already happening. However, be assured that China's global business and influence is only going one way in the long term, and that is up. That is going to present boundless trade and business opportunities impossible to overstate. We in the UK need to ensure that we are at the party and on the top table, sharing in the fun of success with this ambitious, determined and booming country that dominates global manufacturing, is on the lookout for safe investment, and has an enormous and growing domestic market for goods and services.

A spokesman on China Central Television recently suggested that the UK needs China more than China needs the UK. The colloquial term “no-brainer” comes to mind. Almost every country in the world is courting the Chinese in the hope that it will become China's new best friend, the first choice as a business partner and a place to invest. It is imperative for the future prosperity of the UK that we treat this challenge with the same seriousness that we take participation in the Olympics, and ensure that we come first to mind as the natural business, trading and investment partner for our good friends in the East. We have some catching up to do.

Photo of The Bishop of Guildford The Bishop of Guildford Bishop 12:36 pm, 7th November 2013

My Lords, the right reverend Prelate the Bishop of Birmingham deeply regrets that he cannot be in his place today. He is the envoy of the most reverend Primate the Archbishop of Canterbury in relation to China. I am sorry that he is not here speaking, and not only because I am speaking in his place.

We are hearing, and shall continue to hear, many fascinating things in this debate about China, not least from the two maiden speeches, to which we look forward. The importance of student academic exchanges, stressed by some noble Lords, particularly resonates with me. I declare an interest in the University of Surrey with its developing—indeed burgeoning—links with China. That is wonderful.

I begin with the recent comment by Aaqil Ahmed of the BBC on British religious illiteracy. I make a plea for attentiveness to the religious and philosophical, not least Confucian, history of China, without which we shall not be able to understand China today or tomorrow, in all its bewildering and bedazzling complexity. As a metaphor for this bedazzlement, we might consider the current exhibition of Chinese painting at the V&A, which the Foreign Office Minister opened a few days ago, or cast our minds back to the exhibition at the Royal Academy which coincided with the Chinese state visit of 2005, and displayed wonderful artefacts of the Manchu emperors. Just as those paintings and artefacts are of bedazzling complexity and subtlety, so is China’s relationship with western religion and philosophy, and with Christianity in particular.

When Marco Polo visited Kubla Khan in the 13th century, he found to his surprise, in and around Nanjing, ancient Christian communities originating from Syriac-speaking eastern Christianity, probably from the seventh, or maybe the fifth or sixth century, along the Silk Road, following the economic tracks of the world. At a later date, there is an extraordinary monument to a Christian bishop from the so-called Nestorian Church of China from that early period. The combination of Christianity and China is not something new.

In, the 17th century, the Jesuit Matteo Ricci settled in China for many years, and accommodated his little community to Mandarin culture. By his time those earlier traces of Christian communities had almost disappeared. He experimented boldly with a Confucian interpretation of the Catholic faith. In the end, he was not supported by Rome. If noble Lords want a fascinating account of a dialogue between western philosophy and culture and Mandarin culture in that period, Cambridge historian Mary Laven’s book on Ricci’s mission to China is a very good way in. The stories of various 19th-century Protestant missions to China are much better known. They have their heroes and their heroines but I will not take time on that this afternoon in your Lordships’ House.

My point is that any understanding of the interrelationship between this country and China needs to take into account religious and philosophical dimensions that go back many centuries. Today, the Church of England, largely through the most reverend Primate the Archbishop of Canterbury, is building, as best it can, good relations with the China Christian Council. Elder Fu Xianwei attended the most reverend Primate’s inauguration earlier this year and, in a long personal conversation afterwards, invited him to China. I have no doubt that, at some stage, the most reverend Primate will accept that invitation and implement it.

The exponential growth of Christianity in China, especially in the growing eastern cities, is not well known here. There are huge numbers of practising Christians in China, amounting to many tens of millions, although I agree that the exact figure is very hard to determine. They operate largely—to use western language—in non-denominational church structures: roughly speaking, independent congregations in loose federations. The Chinese Government have a close interest in how religion helps in building a harmonious society, now that communism is not the only player in China’s major global role. Here, I particularly single out the work of the Chinese Academy of Social Sciences in Beijing.

The churches, as they noted at the most recent National Chinese Christian Congress, in September, are also making a major priority of international relations. Here is an opportunity for British churches to respond to this as we all give China the attention it certainly deserves. Co-operation is also developing over theological education, especially at the national theological college in Nanjing and with the Amity Foundation, in its work with the poor in rural regions. Amity Printing Presses, in conjunction with the International Bible Society, has produced 20 million copies of the Bible in Mandarin in recent years.

When Matteo Ricci went to China four centuries ago, he took, as a present from the Pope of the day, a chronometer that also showed the movements of the solar system—a wonderful example of western scientific craftsmanship, which made more accurate calculations than the Chinese astronomers and mathematicians could make at the time. However, Matteo Ricci discovered in return the riches of a deep and wonderful culture. This whole debate is about the exchange of religious, philosophical, economic and cultural gifts, et cetera. My plea is that, amid such a rich exchange of gifts, we do not forget to show proper attentiveness to the religious, philosophical and cultural traditions of China and our own country, and their part in what will happen as we further develop our relationship with China.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe Conservative 12:43 pm, 7th November 2013

My Lords, it is a great honour to address this House for the first time. It is perhaps unwise to take the plunge so early, but I could not resist the temptation of talking about China. This is a momentous occasion for me, so I would like to begin by saying thank you. First, I thank my noble friend Lord Dobbs for securing this timely debate and for his fascinating contribution. I have been given the warmest of welcomes by all Members and by the excellent House staff. They are courteous, they are helpful and they are always right. I especially enjoyed the wisdom of the finance department, which warned me to beware of advice from other Members on the sensitive subject of allowances. I thank my sponsors—my noble friend Lord Inglewood and the noble Baroness, Lady Hogg—and my former colleagues from the Civil Service and from Tesco. I congratulate my fellow juvenile, my noble friend Lord Whitby.

I was brought up on a Wiltshire farm, a small business which gave me a love of the countryside and some understanding of the difficulties of the sector. I went to Somerville, Oxford, like one of my inspirations, Lady Thatcher, and I am now an honorary fellow. In Whitehall, I had relatively little engagement with China, as it was yet to become the economic behemoth that it is now. However, in my 15 years at Tesco, China was one of our key growth markets and I visited it frequently.

China is an extraordinary country, as other noble Lords have said, which of course has the largest number of consumers in the world. It will comfortably meet its 7.5% growth target for 2013 and is expected to be the world’s biggest economy in under five years, with an enormous impact across the globe, as my noble friend Lord Howell of Guildford has shown.

I would like to give some brief reflections on what I have learnt about China as an executive at Tesco and former vice-chairman of the China-Britain Business Council. This unique body, now led by my noble friend Lord Sassoon, and so well supported by the Minister, celebrates its 60th year in 2014. The visit of the Prime Minister in 2010, which I was lucky enough to join, and the recent follow-up by the Chancellor have greatly helped to push things along in a favourable direction.

My first point is that UK and Chinese interests can be complementary and that trade is a natural area of collaboration. Even in the 19th century, companies such as HSBC and Jardines built up trading conglomerates and, indeed, cultural links that are still important today. We know from the 2011-2015 five-year plan that China is gradually trying to move its economy from investment to consumption. Its economy has been very unbalanced and, given our recent reliance on the service sector, it is a great opportunity to build lasting export links for British manufacturers.

The area I know is consumer goods, which is a good example. Chinese consumers are hungry for brands such as our own British success story, Burberry. There is a huge opportunity for some of our great shopkeepers, with Boots, Mothercare, B&Q, Paul Smith and Tesco all flying the flag there. I was also involved in seminars with MOFCOM, the Commerce Ministry, on the transfer of climate change-related innovation. China of course has a history of flooding and famine; pollution is evident in the orange skies above Beijing and other eastern cities. So there is a huge opportunity for exporting UK expertise on green building, pollution control and carbon-friendly refrigeration. Conversely, there is a wonderful opportunity for the Chinese to invest in the UK and I was gratified to see the announcements last month about Manchester Airport and Hinkley Point.

I have done business in many countries and I believe that Britain is the country that is now most open for business. For the overseas investor, it is easier to set up and get through the necessary red tape here than in pretty well any other country in the world. Traditionally, there have been visa impediments to Chinese investors and I am so glad to see that the Government are now tackling those. However, we should expect China to reciprocate and the Chinese to be equally welcoming. So far, this has not always been the case with proposed UK investments in China.

My second theme is: “Think local”. Working in Asia is very different from working in Europe and especially from working in America. Having a local Chinese partner makes a positive difference and I would recommend it. Thinking local is also important in another respect, because northern and southern China are very different, not least climatically. The goods you sell and the services you offer have to take account of these continental-style differences. China cannot be looked at through the prism of a homogenous nation. By thinking local, UK firms can build networks with local operations catering to specific local needs.

My final thought is about ambition. As the Chancellor said during his recent visit, there is an ambition in China and a surprising sense of optimism—similar, in a way, to Victorian Britain or 1890s New York. The ambition of the Beijing Olympics inspired us to do even better last summer. Britain excelled in Olympic sport and also, of course, in creativity, with the sheer entertainment value of those four extraordinary weeks.

While they have demonstrated some less attractive features, the Chinese have always shown great wisdom, not least with their treasure trove of proverbs. My noble friend Lord Dobbs quoted one:

“A journey of a thousand miles begins with a single step”.

A maiden speech is a perfect example.

Photo of Baroness Bottomley of Nettlestone Baroness Bottomley of Nettlestone Conservative 12:50 pm, 7th November 2013

My Lords, it is a great privilege for me to follow my noble friend, who has indeed been a friend for more than 20 years and a colleague in many settings. The great strength of her contribution today and of her contributions going forward is the breadth of her knowledge and involvement as a really high-flying civil servant. She has worked at the Ministry of Agriculture, Fisheries and Food, at No. 10—critically, at the deregulation unit; I am not sure whether she solved all the problems—and then she moved into the commercial world at Tesco where, for the past 15 years, she has been such an extraordinary success. Her breadth of knowledge and experience, her wisdom and her always practical approach will be a great addition to your Lordships’ House, so she is very warmly welcomed. We look forward very much to the next speech—do not delay.

I also congratulate my noble friend Lord Dobbs on securing this debate and on his very thoughtful words. Comments have already been made about the fact that today is the birthday of various pretty important people, including Billy Graham, the evangelist; Jean Shrimpton, the model; and Rio Ferdinand, the footballer. Most importantly, it is the birthday of our very special colleague, my noble friend Lord Green of Hurstpierpoint, who, in my view, is the thoughtful architect behind discussions on this great movement of west to east and north to south and the critical importance of China. The China-Britain Business Council, the noble Lord, Lord Powell, Sir David Brewer and my noble friend Lord Sassoon have all played a part, but my noble friend Lord Green’s experience as chairman of the largest company in the FTSEHSBC—and his experience in that part of the world meant that he knew directly that China was not merely a foreign country but a place with massive potential. From my perspective, he was very much a John the Baptist in articulating most forcefully how critical it was that we had a completely new relationship with China. He will be much missed in his role when, in due course, he finds freedom and liberation, but we hope that he will continue to guide our thinking in many ways.

Mention has been made of the Silk Road, and this was very much in my mind going back to the second century BC, along which traders, merchants, pilgrims, monks, soldiers, nomads and urban dwellers travelled, trading goods, technologies, religions and philosophies—as well, I am afraid, as the Black Death and the bubonic plague. I pay tribute to the right reverend Prelate the Bishop of Guildford—who, again, will not be with us all that much longer—for his comments about the importance of religion and philosophy. Their bedazzling complexity and subtlety is extraordinarily important. I share a life with him, having been a lay canon at Guildford Cathedral and having had a close involvement in the University of Surrey, where that connection has been crucial.

I want to specialise in the area about which the noble Baroness, Lady Warwick of Undercliffe, spoke: the fundamental importance of education. The English language is the language of business globally. That gives us the most extraordinary opportunity. I will recite all the economic benefits of international partnerships and of overseas students. Over and above the economic advantage for Britain of this wonderful export industry, I believe strongly that universities, particularly in the UK, are the places where intellect, integrity, culture and values are set. At that age, people need a moral compass to set them out on the world. The world today is not monochromal; it is a global world with cultures mixing. I declare my interest as an executive director of Odgers Berndston, where I people-traffic corporate global leaders and, very often, leaders of higher education institutions. The one thing in business that people need today is individuals who are culturally sensitive. It is no good being a Brit, a Welshman or a Scot; you have to be a global citizen.

My noble friend Lord Bamford was introduced earlier today, with all his activities at JCB in China. We need, in all our fields of endeavour—finance, commerce and academia—individuals who view the world as one community. It is really hard to develop that later on if you have never been educated with people of different cultures and backgrounds. The privilege of UK universities now is that they have become so multicultural and that people at that age make their contacts and connections. When I was young, you frequently did not go to even a mixed-sex university or college. Perhaps it was very much composed of people of a similar social background. We should compare that with the multicultural nature of our universities today, particularly when it comes to students from China.

There are some 78,000 Chinese students in the UK. Many of your Lordships know that the greatest pride in my life—apart from responding to my noble friend’s maiden speech—is to be chancellor of the University of Hull. As a great port going out into the world, it has a large number of international students. Some 13% of them—707—are Chinese. At the University of Surrey, I share with the right reverend Prelate some 1,600 students from China. These institutions are involved in joint campus collaborations. The University of Nottingham was the first non-Chinese foreign university set up in 2004. The Universities of Hull and Surrey now have flourishing establishments and relationships with China. Above all, the Open University, under Martin Bean’s leadership, has reinvented itself and has been recognised in the strategic plans in China, with

200,000 learning through Open University courses. There is also the establishment of FutureLearn, MOOCs and the new technologies.

With this huge population expansion and young people hungry for education, we need to find every means possible to help them join the graduate community of the world. I believe that we in the United Kingdom can play a very full part in making that happen to mutual self-interest.

Photo of Lord Haskel Lord Haskel Deputy Chairman of Committees, Deputy Speaker (Lords) 12:58 pm, 7th November 2013

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.

Photo of Lord Goodlad Lord Goodlad Chair, Secondary Legislation Scrutiny Committee 1:04 pm, 7th November 2013

My Lords, I join other noble Lords in congratulating my noble friend Lord Dobbs on his perceptive speech introducing our debate. He has given us much food for thought. I also endorse the tributes paid to my noble friend Lady Neville-Rolfe on her eloquent maiden speech, and I, too, hope that we shall hear more from her in future.

My noble friend Lord Dobbs rightly dwelt on the pace of change in China and the possible directions that change might take. He alluded to possible implosion. What, if anything, should the British Government and Parliament be doing to influence future change in China? My noble friend Lord Howell, in his most recently published masterpiece, Old Links and New Ties: Power and Persuasion in an Age of Networks, has this to say:

“Those schoolbooks about capital flowing from the West into the developing world are history. The wealth, as well as the … technological skills, have long since been flowing the other way, with the debt-laden Western ‘powers’ now turning east and south for desperately needed investment and capital from the massive savings and the huge sovereign wealth funds of Asia. It is now from India and China that we have so much to learn, not the other way round. They certainly don’t want lectures from us”.

So, no lectures please.

However, it is perfectly possible, as the Foreign and Commonwealth Office has been doing for a very long time, to exert quiet and helpful influence, to encourage moves towards greater openness while avoiding explicit criticism or confrontation and to continue to support reform in China, not just on the rule of law and the judiciary but also in areas such as bribery, transparency, open government and the development of civil society, not through lecturing or preaching but through the sharing of best practice with partners representing a very ancient civilisation.

Is it appropriate, some ask, that in its reports on human rights and democracy the FCO should publicly comment on subjects such as China’s online censorship, harassment of human rights defenders, the inadequacies of safeguards in China to guarantee the rule of law and access to justice, Tibet and other subjects? The answer is clearly yes, it is appropriate and important. Why else would China engage in more than 20 rounds of the UK/China human rights dialogue on subjects such as detainee rights; migrant rights; capital punishment; freedom of expression; freedom of religion; China’s plans for ratification of the International Covenant on Civil and Political Rights; ethnic minority rights; individual human rights cases; the role of faith groups in civil society; and the use of evidence in criminal trials? The Government of the People’s Republic do not want implosion.

I shall say a brief word about Hong Kong as part of our relationship with China. Hong Kong constitutes a very large proportion of China’s economy and for historical reasons, as has been said, we have an enormous stake in Hong Kong, as Hong Kong has here. This historical and still growing interrelationship is not and will not be at the cost of our economic relationship with Shanghai, Guangdong, Chengdu and the other growth points of China but complementary to them. It is an important relationship, both to China and to this country.

The Foreign Office, rightly, takes very seriously its commitments under the Sino-British joint declaration. A recent six-monthly report to Parliament on the implementation of the Sino-British Joint Declaration on the question of Hong Kong concluded that after the handover of sovereignty in 1997 the rights and freedoms guaranteed in the joint declaration have in general been respected. The rule of law and the independence of the judiciary continue to be upheld. The report expressed concerns about freedom of the press and of expression and urged the new chief executive to ensure the full protection of the rights and freedoms which are essential to Hong Kong’s success. In the foreword, my right honourable friend the Foreign Secretary said that he looked forward to further substantive progress towards full, universal and equal suffrage for elections in 2017 and 2020.

It is to be welcomed that the UK branch of the Commonwealth Parliamentary Association is sending a delegation to LegCo next week to discuss matters of mutual interest. They can be assured of a warm and enthusiastic welcome.

There is a very high degree of experience and concern for Hong Kong in your Lordships’ House. The Foreign and Commonwealth Office’s six-monthly report to Parliament, to which I have alluded, could perhaps be debated in this House if the Government can find time. Perhaps the Minister would like to talk to his colleagues about that, because I think this House could make a helpful contribution.

The former Prime Minister and Foreign Minister of Australia, Kevin Rudd, himself a distinguished sinologist, wrote recently in the New Statesman:

“the challenge we all face (China included) is managing the rise of a non-democratic China as a great power within the framework of the international order … It will require the highest levels of political engagement and thoughtful diplomacy that the world has seen since the end of the cold war”.

The outcome of the recent fifth China-UK economic and financial dialogue has clearly marked an important step forward in China-Britain relations. China believes that the growth of China-UK relations serves the shared interests of both countries and contributes to world peace and development and wishes to work for a more healthy and stable relationship on the basis of respecting each other’s interests and concerns. It is in everyone’s interests that we pursue stronger and deeper trade and economic relationships, while at the same time maintaining our long-standing position on human rights. The welcome developments of recent weeks and months have proved that where there is good will and a mutuality of interest, much can, and will, be achieved.

Photo of Lord Watson of Richmond Lord Watson of Richmond Liberal Democrat 1:12 pm, 7th November 2013

My Lords, I too join in thanking the noble Lord, Lord Dobbs, for instigating this debate and congratulating my noble friend Lady Neville-Rolfe on her excellent maiden speech. I am sure that we shall hear more from her as the months go by. She and I shared a fascinating visit to Beijing in 2010 to look at the rapid changes in retailing in that city. For me it was also a huge contrast with my first visit to Beijing in 1977, a year after Mao Tse-Tung’s death and a year before Deng Xiaoping’s return. It was then, of course, a city of bicycles; it is now one of traffic jams brightened by a profusion of pink Rolls-Royces.

Any attempt to evaluate recent developments in our relationship with China requires perspective. The best any of us can do in a short debate is to share relevant experience and any particular insight that such experience may have given us. Mine centres on the contradiction in China between extraordinarily rapid economic growth and change and the continuity of monopolistic political power and the impact of this contradiction on our relationship.

As has already been pointed out, we are having this debate two days before the third plenum of the 18th Central Committee of the Communist Party of China, the first for the party chief and State President. There is much speculation that this could bring about a change as radical as that brought about by Deng back in 1978. My second visit to Beijing was in that year. Even then, as a foreigner, you felt the force, like a second earthquake, of impending change. Twelve months earlier I had been restricted to the Hotel of Foreign Nationalities, with its shop selling only the little red book and admiring accounts of Red Guards who had done the right thing by denouncing their parents. The year 1978 was all about change, with China opening its relationship with us and with the rest of the West, and life flowing into new channels of entrepreneurialism and trade. That year changed our relationship. Will 2013 do the same?

China is in the forward planning and investment programmes of virtually every major business in the western world. Countries compete frantically to sell to China and to attract investment from China. Boris Johnson and George Osborne outdo each other—and outdid each other—as super-salesmen. Some, of course, urge us to shed all restraint and become a new generation of buccaneers. Many people advocating such a course believe that we would do far better in China unfettered by the European Union—conveniently ignoring the fact that Germany, at the very heart of the EU, sells four times the value of goods and trade to China than we do.

Whether singly or as the EU, we all know that recovery from recession turns critically on what happens next in China. Here we face the contradiction with which I began: amazing change on the one hand, and the continuity of communist power on the other. It is that contradiction that will challenge the third plenum, taking place behind closed doors this weekend.

Will Hutton, writing in the Observer after George Osborne’s visit, dubbed him, uncharitably and unfairly, “Bambi in Beijing”—allegedly because he had ignored the obstinacy of Communist power and the determination of the party to retain it. No doubt that determination does exist, but it is shot through with contradictory pressures. There are the aspirations of an urban population of 665 million, many in the 129 Chinese cities with populations of more than 1 million people. There are the great disparities of wealth between those still stranded on the land—or, indeed, dispossessed by urban development—or trapped as what must be described as sweated labour in so many regimented factories. There is the urgent need to liberalise the economy and break up state monopolies if consumer spending is to soar, as it must, as the domestic economy becomes China’s key source of growth. There is the imperative to do this as China’s export advantage of low production costs erodes. Above all, there is the tension between economic liberalism and political control.

The Foreign Office Minister believes that,

“political reform and economic reform come hand in hand”.

If they do not, failure could foster a catastrophic shift in the tectonic plates beneath China’s surface. In the other place, the Prime Minister assured us that the UK will stand firm on human rights. It would be good to hear the Minister confirm that there was no apology from the Prime Minister for the Dalai Lama’s visit to London and his meeting with him. Human rights and political reforms are, in the end, the only way to sustain and grow the prosperity of China. So old and deeply talented a civilisation has the ability to resolve these contradictions, and it is our hope—and our interest—that it does so.

Let me end on a personal note. In the north-eastern city of Shenyang my late mother-in-law, a brilliant German businesswoman, Erica Lederer, began to manufacture decorative goods for the German market very shortly after the cultural revolution. She admired the people, their skills, their competitiveness and their friendship. At the centre of Shenyang stands perhaps the biggest statue of Mao Tse-Tung in the whole of China. Under his granite feet the talent and aspirations of ordinary Chinese people were even then, in that first year after the cultural revolution, beginning to shift the ground, and are doing it so much more so today.

Photo of Lord Whitby Lord Whitby Conservative 1:20 pm, 7th November 2013

My Lords, it is truly an honour to speak for the first time in this noble House. I begin by thanking your Lordships warmly for your generous welcome and the staff of the House who, despite my regular pestering, have been remarkably kind and understanding. I would also like to thank all those people who have helped me on my life’s journey to this point, not least my sponsors and noble friends Lord Baker and Lord Edmiston, my family and friends, who have guided and loyally supported me throughout, the people of Harborne, who elected me, and my political friends and colleagues from both the Conservative and Liberal Democrat Parties, who entrusted me for eight years with the leadership of the largest metropolitan authority in the United Kingdom.

During those years a considerable amount of my time and energy was focused on developing and nurturing a sophisticated political relationship with Beijing and several of China’s powerful cities. We structured a campaign of engagement and business development between Birmingham and China, a programme which used civic links to build bridges into China and reinforce them with formal twinning between several major cities. The results have been impressively tangible. The Greater Birmingham City Region exports £2.7 million-worth of goods to mainland China, far more than the south-east region. We make up almost a quarter of all UK trade with China and are the only region in Britain that has a trading surplus with China itself. That success is due in no small part to Jaguar Land Rover exports, which increased 74% last year on the previous year and are already ahead by a further 24% this year. As a proportion of Jaguar’s total sales, China is now Jaguar Land Rover’s largest global market.

Despite the collapse of MG Rover in 2005, manufacturing is still taking place in Longbridge. Most importantly, however, the new Chinese owner of the brand, SIAC, has invested heavily in research, development and car design, creating 400 engineering jobs. The MG magic, quintessentially British, still has its heart in Birmingham, and the new MG3 was recently launched from Longbridge in September. The combination of British design and Chinese production is a powerful example of the bilateral benefits of Chinese investment. The former premier of China,

Mr Wen Jiabao, when visiting MG in Birmingham in 2011, received from me the first MG6 from the production line and commented:

“The relationship between Birmingham and China should be the model for the relationship between the United Kingdom and China”.

Noble Lords will appreciate that my blushes were similar in hue to the Chinese flags fluttering proudly alongside the union flag.

I congratulate my noble friend Lord Dobbs on securing today’s debate, which follows on from the recent highly successful talks between Chancellor George Osborne and his Chinese counterpart, vice-premier Ma Kai, as part of the economic financial dialogue between Britain and China. I welcome the Government’s bold decision to reform the UK’s visa application system. During my administration in Birmingham we increased tourism from 29 million visitors in 2005 to 33 million in 2011, generating more than £5 billion of economic improvement while supporting 60,000 jobs. We are already a major destination for Chinese business visitors and tourists and expect to double the number of Chinese visitors over the next decade. The city region already attracts 7,375 Chinese university students, according to the latest statistics. However, the challenge is that 83 million Chinese tourists left China last year, the biggest tourism market in the world, spending £63 billion between them. The United Kingdom saw just a fraction of those visitors, with only 180,000 coming to the UK. I believe that with sensible and sensitive visa arrangements we can dramatically improve our student visitor economy.

The Greater Birmingham City Region is currently undergoing transformational transport infrastructure projects such as New Street station, new metro lines and the extension of the Birmingham Airport runway. Connectivity is essential to the growth of our regional economy and point-to-point airline routes which connect you to the growth nodules of the world, and in particular to China, are imperative. I ask the Minister to encourage his Government colleagues to support direct flights between the City of Birmingham and Chinese cities when such opportunities are presented as the runway extension is opened in 2014.

In my case today it is not “for whom the bell tolls” but rather how quickly the clock ticks. I once again thank my noble friend Lord Dobbs for instigating today’s debate, which affords us the time to reflect upon the wealth of opportunities China has to offer and how the success of Birmingham and the greater Birmingham region with China has complemented the United Kingdom’s growth agenda.

Photo of Lord Lexden Lord Lexden Conservative 1:26 pm, 7th November 2013

My Lords, the whole House will join me in congratulating my noble friend Lord Whitby on his excellent maiden speech. His fame goes before him as a most effective and vigorous leader of Birmingham City Council, the city of Joe Chamberlain, which my noble friend served devotedly, not least as head of a notable coalition administration, to which he made reference. He gave us a fine taste of his vigour and determination in his speech and will bring an important dimension to our debates, which we will value. I also pay tribute to my new noble friend Lady Neville-Rolfe for the wise and wide-ranging reflections that she provided in her memorable maiden speech.

By common consent this is an important debate, for which we are indebted to my noble friend—and long-standing personal friend—Lord Dobbs. It provides an opportunity, among other things, to draw attention to the extremely significant contribution made by British schools and sixth-form colleges to the ever-expanding and closer relations between our country and China. My noble friend Lord Kirkham made brief and vigorous reference to that. The importance of education in bringing our two countries closer together has not been neglected, but it tends to be discussed almost entirely in relation to higher education. Our universities and other higher education institutions are at the centre of this dynamic academic relationship, as the noble Baroness, Lady Warwick, and my noble friend Lady Bottomley reminded us.

Nearly 79,000 students from mainland China were enrolled in our higher education institutions in 2011-12, nearly double the number in 2007-08. However, it is important to note that this growth in numbers has been assisted in no small measure by British schools, and in this achievement our country’s independent schools loom large. I declare an interest as president of the Independent Schools Association, which represents the heads of some 300 smaller, less well known independent schools and which forms part of the Independent Schools Council, of which I was general secretary for some years, working for some 1,200 schools altogether. I also speak as president of the Council for Independent Education—CIFE—which is a professional association of 18 independent colleges that prepare students for university.

Young people come to British schools from a wide range of countries. Some come to our maintained schools: to the state boarding schools and others that have an international outlook. But the vast majority of overseas pupils come to British independent boarding schools and sixth-form colleges, influenced no doubt by OECD surveys, which rank our independent schools among the best in the world. Most of these schools are members of the Independent Schools Council. Currently, 26,000 non-British pupils whose parents live overseas are being educated in them.

The growth in the mainland Chinese market has been one of the most striking features of the recruitment of foreign pupils to British schools in recent years. Traditionally, Hong Kong was the principal provider of overseas pupils, but today, the number of new pupils from mainland China is catching up with the number from Hong Kong, and will soon overtake it. Their combined numbers account for nearly 40% of all overseas pupils in ISC schools—slightly more than the total for the whole of the European mainland. The mainland Chinese number increased in the past year by 5.4% to a total of almost 4,000. This is in addition to a total of more than 5,700 from Hong Kong.

Chinese parents are attracted by: high academic standards; expertise in English language teaching; absorption of a full British education experience, in many boarding schools alongside other international pupils; good pastoral care; a secure environment; opportunities for entry to UK universities; and, not least, by the warmth of the welcome extended to Chinese students in independent schools. A growing number of ISC schools teach Mandarin, and I hope that the number will rise, not least as a result of the comments made in this debate.

Students from China form a particularly successful and welcome element of the 18 CIFE colleges. Last year, 85% of their 200 Chinese students in their final year gained places in higher education institutions in Britain. Here are comments made by two of the college heads in a survey which I have just conducted. The first said:

“Last year, our most academic student was Chinese and progressed to Imperial College to do theoretical physics. Most Chinese students progress to a Russell Group university”.

The second said:

“Our Chinese students are very successful, as demonstrated by our strong results and university destinations. Yet we are non-selective, supporting Chinese students of all ability ranges to achieve their goals”.

In all specialist areas of teaching and learning, the story is the same. The links between our country and China are expanding, to the benefit of both. Music provides a telling example. The Royal College of Music’s chair of international keyboard studies, Professor Vanessa Latarche, is vice chairman of Lang Lang Music World, a school for gifted pianists in Shenzhen. Lang Lang gives regular master classes at the RCM, including one this very month. A successful working relationship with the China Conservatory of Music in Beijing has been firmly established. The director of the Royal College of Music, Professor Colin Lawson, said:

“In China, we continue to look for partnership opportunities, artistic collaboration, and provision of local RCM auditions”.

The long-term benefits to Britain that accrue from hosting thousands of young foreigners for a formative part of their education are incalculable. The financial benefits in foreign currency earnings are calculable, and run into hundreds of millions of pounds. Even more important are the links that successive generations of British-educated Chinese, and other foreigners, establish and retain with the United Kingdom. Many will eventually occupy influential positions in their own countries.

Photo of Baroness Dean of Thornton-le-Fylde Baroness Dean of Thornton-le-Fylde Labour 1:34 pm, 7th November 2013

My Lords, I join other Members of the House in thanking the noble Lord, Lord Dobbs, for initiating this debate; he introduced it in a very positive way, while at the same time being realistic about the challenges that face us in our relationship with China. We have had two excellent maiden speeches, enjoyable and full of the experience of the two new Members of the House. I wish them well and look forward to their future contributions.

The UK exports more each year to Ireland than it does to China. China has a population of 1.5 billion. That is quite a statement and it demonstrates the challenge that we face. We have barely 1% of China’s imports, and Germany has 5%. We have got quite a long way to go. Indeed, the noble Lord, Lord Green of Hurstpierpoint, in his period at the department has done a lot, not only to encourage, but to push things forward. I know this from personal experience; I went to see him about air traffic services. I am on the board of NATS. He personally made some changes which have helped the development of that organisation and it is now in 32 countries throughout the world. Unfortunately, it is not in China. I ask the noble Lord, in the short time he will still be at the department, if he would make sure that we have a role there, on trade missions. Certainly, aviation is expanding at an enormous rate in China. For an island, our connections with the companies and countries that we export to are crucial. The noble Baroness, Lady Valentine, was right in what she was saying, as a number of other Members have been.

The multinational companies have been doing quite well, but of course Britain is made up substantially of small and medium-sized companies. We have not been doing so well in that respect and I suggest that we need to make a concerted effort. The UK has got enormous opportunities of leverage, in the strong positions in our design, innovation, and environment management; in particular, healthcare; life sciences and green tech, as well as aviation.

I would like to concentrate on the role of higher education and the assistance that it can, and does, give, and could continue to give. Many of the Chinese elite were educated in this country; many of them still continue to send their children to our fine UK universities. I support what noble Lords have said, in particular what my noble friend Lady Warwick of Undercliffe said about visas. There seems to be a bit of a disconnect here; you talk to the civil servants and they say “There isn’t a problem”. But we know that there is, and somehow that disconnect has to be addressed. Bo Xilai sent his son to Harrow. There are education connections which we could build on; we have very few expats living in China, yet half a million Chinese people who have been educated here are now back in China, and they are certainly people we could have a good relationship with.

I need to declare an interest; I am on the council of Nottingham University, which was mentioned this morning. We have a university at Ningbo. It is a partnership, but it is actually called The University of Nottingham Ningbo. It is run by Nottingham, and when the university was built less than a decade ago, it was built on farmland. Next year is its 10th anniversary. The city has grown in population from 5 million to just under 10 million in that short time. The university has 6,000 students, 10% of whom are international students, while the rest are Chinese. They are being taught to a degree which is Nottingham University UK accredited, and they are taught in English. The capital assets of the university are held in partnership with the Chinese city fathers. The chairman is a local Chinese woman, and the governing council has Chinese members on it too. But the academics are not Chinese—they are international academics, drawn from all over the world. I was there a month ago and met with many of the students and alumni. They are hungry for education. In parallel with that, they are determined to succeed. When you talk to them, they do not necessarily see themselves remaining in China.

As part of that trip, when we went to Shanghai we visited Fudan University where we were told that it has been decided in the past few months that by 2020 every student must spend one year of their education outside China. That is quite an opportunity for us. It also clearly demonstrates their ambition. I felt a great deal of pride in listening to our pro-vice-chancellor Christopher Rudd make a speech off the cuff in absolutely wonderful Mandarin. That went down very well with our Chinese guests.

Over the past few months we have seen Ed Davey—he was at Fudan when we were there—go to China to talk about the environment; we have seen the Chancellor go; and, in a few weeks, I gather that the Prime Minister is going. I give the Government credit for that. It clearly demonstrates an energy which we need in developing our relationships with China. Indeed, if the Prime Minister had the time to see Nottingham in Ningbo, he would be very welcome indeed. Maybe the Minister would consider putting that on his desk.

We have a lot that we can lever in China. We have to be realistic and pragmatic about it. We have to accept that it is a two-way stretch: it is not just us telling China but us learning from them. Until January this year, the chancellor of Nottingham University was Chinese. A Chinese chancellor in a UK university: that is true partnership.

Photo of Baroness Wheatcroft Baroness Wheatcroft Conservative 1:41 pm, 7th November 2013

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.

Photo of Lord Haskel Lord Haskel Deputy Chairman of Committees, Deputy Speaker (Lords)

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.

Photo of Baroness Wheatcroft Baroness Wheatcroft Conservative

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.

Photo of Lord Wilson of Tillyorn Lord Wilson of Tillyorn Crossbench 1:49 pm, 7th November 2013

My Lords, China is enormously important. There are always new things happening there, and it is endlessly interesting. I feel very supportive of the view that China is now so much of a world power that we must be involved with China, try to get China involved in all the major issues in the world, encourage China to take part in international organisations, and encourage those organisations sometimes to adjust themselves to take account of China’s joining.

The visit recently by the Chancellor of the Exchequer and the Mayor of London to Peking seems to have put our own bilateral relationship back on some good rails, and that is very encouraging because, without that top-level relationship in good order, it becomes much harder to deal with things at different levels. It is interesting to note that, as the noble Lord, Lord Dobbs, in his splendid and far-ranging speech opening the debate, said, over the past three years, despite some difficulties in our own bilateral political relationship, our exports to China have gone steadily up, and Chinese investment here has gone up too.

As the major things have by and large been dealt with, I should like to concentrate on some practical building blocks in the relationship with China. The first is the importance of learning the language, to which the noble Baroness, Lady Wheatcroft, has just referred. My attention was drawn the other day to an extract from a foreign-language journal in Shanghai. It lamented the fact that foreign businessmen in Shanghai failed to realise that speaking Chinese was essential to promoting trade. The date was January 1924. The point is still worth making, but the good news about our trading relationship with China is the significant number of young people, including from the United Kingdom, who go to China, who deeply immerse themselves, and who speak very good Chinese. I find that very encouraging.

I find, too, very encouraging the fact that the Foreign and Commonwealth Office seems to be reverting to a more traditional approach of believing that regional expertise really does matter and that language matters. I understand that, with the strong support of the Foreign Secretary, there has been a great promotion of learning foreign languages, including Chinese. It would be very interesting if the Minister had those figures because it would inform us.

The noble Lord, Lord Dobbs, referred to the single step that starts any long journey. The single step is at a lower level. University work on China, as he pointed out, particularly at PhD level, is not nearly good enough. The number of students at university level is not good enough. We also need to start at school level. There the picture is mildly encouraging. I should declare an interest. I am president of the Scotland-China Education Network, which tries to promote the teaching of Chinese in Scottish schools under the inspired leadership of Dr. Judith McClure, former head teacher of one of the major girls’ schools in Scotland. There are about 10,000 young people in Scotland learning Chinese at state schools, and there will be more in the private sector.

There are, however, practical problems. This gets back to the visa problem, to which so many noble Lords have referred in different forms. There is the problem of getting people from China to teach Chinese in our schools throughout the UK. Recently, to take an example in Scotland, the Confucius Institute in Strathclyde University in Glasgow wanted to renew the contracts of some of their Chinese teachers who had been there a year. The UK Border Agency has apparently changed its rule so you can have a year, and it cannot be renewed. Some of those teachers were told they could not come back. Late last night I was told that the immediate problem has been resolved, but the underlying problem remains: how do we get people from China to teach Chinese? There is a similar problem at another Confucius Institute, the one at Aberdeen University, where I have an expired interest, having stepped down as chancellor at the end of last year. I hope the Minister will take account of these problems, although they are not his departmental responsibility, and try to bring together the UK Border Agency with those who are involved. Perhaps it would be a good sort of birthday thing to do before, sadly, he steps down from his present post.

The noble Lord, Lord Goodlad, referred to the significance of law in China. There was a very good programme here run by the Great Britain China Centre, of which the noble and learned Lord, Lord Howe, is president, to train Chinese judges. About 80 have been trained in the past decade or more. Funding, which came from the Ministry of Justice, has run out. It is a very good, practical thing we could do. Those people go back to China, their influence spreads, and it is extremely valuable. Perhaps the ODA could take that on.

Finally, there is the matter of Hong Kong, to which the noble Lord, Lord Goodlad, also referred. Our political position there has hugely changed since 1997 but Hong Kong has institutions, a legal set-up and a government structure which make it very user-friendly for people from the United Kingdom. It is a very good jumping-off ground for trade and all involvement with China. I am sure that the Minister, with his own personal background, will feel strongly about that and therefore I can appeal to him to encourage his colleagues to continue to see the importance of Hong Kong in our relationship with China.

Photo of Lord Wei Lord Wei Conservative 1:56 pm, 7th November 2013

My Lords, I too want to thank my noble friend Lord Dobbs for tabling this very timely debate, and also congratulate the noble Lord, Lord Whitby, and the noble Baroness, Lady Neville-Rolfe, on their outstanding maiden contributions today. A happy birthday, too, to the noble Lord, Lord Green, who will be sorely missed in his role as trade Minister.

I declare an interest both as someone with Chinese ancestry and as one who was born and grew up in Britain. This led me quite naturally upon entering your Lordships' House a few years ago to take a keen interest in the nature of the relationship between the UK and China, of British business and interests in China, and in the state and condition of the Chinese in Britain. To this end, I also declare an interest as the chairman of the APPG for East Asian Business, as co-chair of the Conservative Friends of the Chinese and as a non-executive director of the Manchester-China Forum. I also declare a number of other related interests which can be seen on the public register.

In each of these roles I hear much about the challenges and criticism from both sides in the UK-China relationship, from both the media and through public debate, as well as behind closed doors. There can be no doubt that there has been and will likely continue to be areas of major disagreement and cultural and political differences in the relationship between our two countries. I could spend much of this speech recounting the historic disputes and perceived injustices on either side. These might include British imperial imposition by gunboat on China of goods such as opium and other wares which Gladstone described as morally indefensible and which ultimately hurt us when our protected trade succumbed to global competition. Similarly, companies in Britain at times feel competition from China has been unfairly backed by a favourable currency, state subsidies and an intellectual property framework that historically has been hard to enforce, all under the control of a Government who exert supreme authority over their citizens and media.

I could go on recounting such instances but I will not because these issues are both complex and culturally and politically difficult to resolve. Will we ever get agreement if we see the world just through the Chinese leadership’s eyes? They are concerned to maintain stability in a country that is known to descend into anarchy if not led well and strongly; they are cautious about religion, as past cults have led to extreme acts of violence and terrorism, such as the Boxer Rebellion. The Chinese Government are keen to avoid other countries’ determining their own internal affairs given colonial experiences at the hands of almost every other major power. Or by pushing our western liberal agenda onto China will we get it to agree to open up faster, introduce democracy on our terms, give up its one-party communist system in favour of a fully western one with a strong and free media and full introduction of the rule of law? Your Lordships can see how these divergent approaches might not lead to swift agreement in the short term. Instead, there is another, pragmatic approach—a word that I choose because both the British and Chinese in general are highly pragmatic people. That is to focus not on what we disagree on at the outset, but on what we have in common. There is a lot we have in common, more perhaps than we realise, and more than is the case between China and many other of our competitor nations.

First, we share similar historical journeys. We as the first industrial nation know what it is like to shift painfully from an agricultural society to an industrial and then knowledge economy, with all the attendant environmental, social, and political issues that this creates. We have a lot of experience to humbly exchange with China on how to manage this transition, and we can also learn a lot ourselves as China attempts to do in 50 years what it took us hundreds of years to do, including adapting our politics to meet the needs of a more urban, connected society and innovating new solutions in healthcare, housing and education in the 21st century.

Secondly, we have a common economic interest. China is shifting from an investment-led economy to one driven by consumption. We are the services capital of the world and have a lot to gain by helping Chinese consumers and service businesses in China flourish, harnessing our knowledge, brands, and expertise. Having ourselves made the shift, we can make a living exporting that know-how to help other emerging countries make their shift as well.

Thirdly, we both love learning. Our higher education and independent school system is the envy of the world; many Chinese love to send their children to study here, and the door is wide open for businesses from Britain to share their vocational knowledge. Many UK businesses could make a living from just doing that for the next few decades, let alone trying to directly service clients in China, such as with Martin Sorrell’s new advertising school in Shanghai.

When I witnessed at first hand the recent visit of the Chancellor—where we with the help of the Manchester-China Forum facilitated the announcement on Airport City—and the visit of the Mayor of London, I saw much to praise in these developments, because we focused on what we have in common, and not necessarily just on what separates us. There is progress on tourist visas, on allowing Chinese banks to more easily invest in Britain, and on enabling investors to help fund our recovery. But there is still more that we can do and ultimately, as a country, we have to choose how we want this relationship to develop. Will we choose to let UK neo-protectionists determine our foreign policy just as they did 200 years ago? Our policies on abolishing the post-study work visa, a key draw for Chinese students; on restricting the number of Chinese executives and family members from coming to help Chinese CEOs set up headquarters in Britain and create local British jobs; and on continuing to count students in immigration statistics all seem to be of the same spirit as that which Gladstone denounced, and could do as much damage as certain imperial monopolies did to our competitiveness and to our regions still today.

Equally, will we let China romanticists determine our policy and expect to walk into China naively assuming to be given a red carpet welcome like our first ambassador to the Chinese imperial court, Lord Macartney? Some organisations and SMEs I know still behave in this way, hardly bothering to learn the language, or engage people who can speak it literally and culturally, then wondering why so little was achieved. Or will we perhaps choose another way, which is to provide UK-China bridges, whether between individuals, cities or organisations, to let people build trust and then decide and act for themselves? As much as we have recently, laudably, reoriented ourselves at the centre towards better China relations, we have also to acknowledge that many recent breakthroughs in trade, from Weetabix to Royal Docks to Manchester Airport City, university and other partnerships, often started through the efforts of individual relationships: through the Anglo-Chinese students and business people who became friends and set up their own joint ventures, involving their parents and networks from the UK and China; through stakes being purchased with the advice of lawyers, friends, accountants and bankers; and through the Chinese diaspora in Britain helping to build academic and commercial links. Perhaps our role at the centre is to increasingly get out of the way, politicising less, and making it easier for bridge builders and intermediaries to do their jobs.

Finally, in the recent Pew Research Centre global attitudes survey, we can see that the population of Britain sees China less as an enemy than do other nations, at 7% compared to the US at 18% and France at 10%, and that the young here are generally more favourable towards China. Perhaps we in politics and the media need to follow the public more closely and let the people get on with it. Osborne and Boris can hardly be blamed for making strong overtures to China; increasingly, they and we by doing so are also playing to audiences at home. A strong UK-China relationship is not just potentially good for the economy, but will increasingly represent, for those keen to follow public opinion, sensible politics as well.

Photo of Lord Howe of Aberavon Lord Howe of Aberavon Conservative 2:04 pm, 7th November 2013

My Lords, although my name does not appear on the speakers list, I hope that I may be allowed to intervene briefly as almost the last speaker in this debate.

I do so because China has been an institution in my life for a very long time. I go back to 1949 when, together with my academic friend, the noble Lord, Lord Jenkin, I sold Conservatism in the Labour valleys of south Wales. The two of us, along with another, were the “brains trust” in the Constitutional Club of Ebbw Vale. The first question asked of us when we put our act over arose from the fact that, on that very evening, a socialist called Ernest Bevin, then Foreign Secretary, had recognised the People’s Republic of China. We were asked whether we thought that this was at all a proper thing for the British Government to do. Mercifully, we had both been subject to academic instruction at Cambridge from Professor Eli Lauterpacht, the international lawyer, and we were very quickly able to define what was necessary for China to be regarded as respectable, which was what we told the socialist miners at the Constitutional Club. That has left China planted firmly in my interests. Of course, it became overwhelmingly so when I found myself as Foreign Secretary, but it was so before that.

The other thing that I would like to emphasise, beyond the huge importance of China, is the outstanding importance of this debate. It is the kind of debate, with much expertise and diversity of judgment, which you would not be able to find in any institution of this kind, save the House of Lords. I am not drawing a lesson from that except to hope that the many arguments put forward by noble Lords here today will be regarded and worked on.

One of the most striking things was to understand the huge leaps that the Chinese leadership had to make as a socialist-dominated and communist-dominated organisation—as it did do eventually under Deng Xiaoping’s leadership. China had been through a period at the beginning of the 20th century when it did have democratically elected and departmental Governments, but that broke down—it did not work.

Deng Xiaoping was able to see not so much the need for political change as the importance of economic change. I talked to him, when I went out there to try to save the future of Hong Kong, and he said by way of encouragement that the American and Japanese Governments had given him assurances that their companies would go on investing in Hong Kong even when it was taken over.

He appeared to understand, when I gave him an alternative view, that Hong Kong was a magnet, and that Americans and Japanese would invest there only because of that magnetism. And that magnetism would not be durable if they found their investments being dealt with unkindly. They needed to have the guarantee of a market foundation in Hong Kong, for the future. Of course, that was not the only lesson that Deng Xiaoping learnt on the matter. But, certainly, the Chinese approach did thereafter recognise the importance of the magnetism of Hong Kong.

Not surprisingly, perhaps, the noble Lord, Lord Dobbs, mentioned Chinese artistic objects, Ming culture and china of the porcelain kind, in the context of Hong Kong. It reminded me of another discussion that took place during the Los Angeles Olympics, and the baton races there. I stressed to Deng Xiaoping that he should think of us not as though racing against each other but as fellow members of a relay team: we are handing over Hong Kong and must make quite sure that the baton does not get dropped. We had to behave as if we were running together in the Los Angeles Olympics.

I do not take credit for having persuaded him in that one address. It was the picture that we were trying to get across, and it was that picture which has laid the foundation for market economics, rather than communist economics, that started in Hong Kong, but began spreading through China as well. The extent to which that is now understood and has been clarified by today’s debate is important. It has been an accurate, encouraging and optimistic debate, and I think the right one to make sure that our Government understand the importance of a liberal trading relationship with China. We recognise the importance of our political relationship. Those arguments have been underwritten in every way in today’s debate, including in the episcopal contributions and excellent speeches by two maiden speakers.

The importance of our maintaining the right attitude towards China, giving encouragement and recognising its importance, will be increasingly acknowledged and, I hope, will follow from this debate to which I have contributed—not, I am afraid, very eloquently but in simple terms. The noble Lord, Lord Wilson, has shown the right approach towards the Hong Kong Chinese, the extent to which democracy was able to found itself there and how the economic bridge with China was strengthened and better understood. I hope that the Government will take note of this debate in deciding how to proceed in our relationship with China.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport) 2:11 pm, 7th November 2013

My Lords, I thank the noble Lord, Lord Dobbs, for securing this debate and for his wonderful introductory speech in which he managed to give us a sense of focus. He led us in what the right reverend Prelate the Bishop of Guildford called “an exchange of gifts”. I thought that was a very apposite phrase. Who can complain about a debate in which there is poetry—if you can say that limericks are poetry. The noble Baroness, Lady Valentine, was kind enough to share her thoughts, an aperçu, about some of the problems that the Government have faced in relation to tourism and trade.

I also pay tribute to the two excellent maiden speeches that have graced this debate. Interestingly, they managed to reach the heart of the debate, possibly in an unscripted way, but we benefitted from that. The noble Baroness, Lady Neville-Rolfe, spoke about her experiences in China and the lessons we could learn from the way in which trade is done there. The noble Lord, Lord Whitby, spoke about work that is happening in Birmingham—how investment changes things in a locality—that is the reverse of the coin. These were both influential and helpful to our understanding of this debate.

I add my congratulations to the Minister for a happy birthday. We have not had enough of the noble Lord in this House and are sorry to lose him so quickly. Ironically, as well as today’s debate, we are meeting again next week in another debate, so we are going out in a rush together. As many noble Lords have said, we are sorry that the Minister will not be with us as we go forward into the New Year.

There seems to be common ground that, in addition to a wider understanding and perspective on China, the key to the present relationship is in improving our exports. That is desirable, possible and even necessary. The UK currently exports $474.6 billion a year. We are roughly the 10th largest exporter in the world. However, we are dwarfed by the amount that China exports, which is more than $2 trillion, significantly more than the United States which exports $1.5 trillion. UK exports to China have grown in the past decade from $0.5 billion to nearly $3 billion. This is welcome, but it is from a very low base. In the first two decades of China’s move towards economic openness, the truth is that we have lagged very far behind Germany and France in penetrating Chinese markets. According to a recent article in the

Economist

, we export only about 50% of the amount that France does and 30% of what Germany does. Our exports to China are only just surpassing our exports to Italy. The graphs crossed in 2011. As my noble friend Lady Dean said, we still export more to Ireland.

There are no major political differences in our wish to improve our export performance, including to China. As part of this debate, we need to examine and address the reason for our continuing poor export performance. Noble Lords are aware that the National Audit Office published a report recently on how we support exporters overseas. It makes for interesting reading. It says that exports need to grow by 10% a year, every single year, to meet the Government’s target of doubling our exports to £1 trillion by 2020. It goes on to say that there seems to be no credible plan or measurement of progress to reach that target. Obviously, UKTI has a key role but it supports too few exporting British firms, according to the NAO. That is not good enough. We have to help more firms to export. Government cannot bridge this gap by itself; it is the firms that do it. We have to help those that already do to export more.

Finance is important in underwriting that. As Daniel Kawczynski, a Conservative MP who has written a report into UKTI performance, has said, over the past 18 months, just 18 small companies have used government export guarantee products which are aimed specifically at them. If we do not deliver more from that route, we are not going to be successful overall. To address this weakness requires an overall system-wide approach within the UK to guide us forward—a rethink of our industrial strategy over the recent period. Whether we pursue this successfully will matter far more in the long run to our economic relationship with China than anything else.

Labour has a credible agenda which the coalition seems to lack. This includes financing innovation, building skills, developing our regions and reforming our banks to ensure that they support the real economy. The economic recovery seems finally to be getting going again after a long and protracted period of stagnation, and that return to growth is something to celebrate and nurture. However, with business investment still on hold, bank lending to SMEs still contracting, youth unemployment still very high and living standards still falling for millions in this country, for most people, there is so far no recovery at all. This is no time for complacency.

In a recent speech the Shadow Chancellor said to the CBI:

“Britain has always succeeded, and can only succeed in the future, as an open and internationalist and outward-facing trading nation, with enterprise, risk and innovation valued and rewarded. Backing entrepreneurs and wealth creation, generating the profits to finance investment and winning the confidence of investors from round the world … That is why we believe it is so vital that government works closely with all businesses—large and small: to promote open markets, competition and long-term wealth creation; and to reform our economy so that, by using and investing in the talents of all, we can deliver rising living standards not just for a few but for everyone in every part of the country”.

We have heard today from several noble Lords that they are optimistic that the UK economic relationship with China will improve as China makes the inevitable transition from being the workshop of the world to being a knowledge and service economy. As this occurs, the argument goes, the Chinese will demand more of our excellent services in areas such as finance, the wider professions, health and higher education. As the noble Lord, Lord Haskel, warned us, we must be careful. In recent years, British universities have congratulated themselves on the large numbers of Chinese who have chosen to study in the UK. They have been welcomed here, and they have also become necessary to the survival of many of our departments and courses. There are various reasons why these students choose the UK, but an important one has been the lack of appropriate courses at home. However, that is fast becoming an obsolete reason, as Chinese higher education develops. The traditional elite universities have taken stock of international examples, welcomed new staff out of foreign postgraduate training, recruited foreign lecturers, started to reform teaching and curricula and developed new courses. Some 1,300 private universities have been established, usually with flexible, practical and very work-oriented courses and modules.

So China presents three challenges to the model we have of us being the experts, giving them UK higher education. First, China will not for long be a source of overseas students if its own universities overtake ours. Secondly, Chinese higher education clearly intends to offer its services in the world education market. Thirdly, in China there are, at present, 16 million students in higher education, with plans for 20% of secondary school leavers to be in higher education by 2010 and 50%—a familiar figure—by 2050. Even if a small proportion of these have a first-rate education and can use English, they will be competing with our graduates in virtually every field, unless, again, we can provide something very special from within the United Kingdom. Does the Minister agree that it is important to learn the lessons of Chinese education, both positive and negative, and apply them to our own institutions?

We have heard that the Government are desperate to secure Chinese investment in the UK. The tough regulatory approach to banking that was introduced after 2008 has been relaxed to promote trading in the Chinese currency in the City. Guaranteed electricity prices—double the present level—have been offered to secure Chinese investment in the EDF nuclear station at Hinkley. We are not against these measures per se, but we would like to see a much more serious debate about their justification and the implications that will flow from them, so perhaps the Minister will comment on that when he responds.

According to a recent article in the Economist in June this year, perhaps the single most disappointing aspect of the British economy in recent years has been its export performance, about which I have been talking. Against that background we have to remember that sterling is 25% cheaper on a trade-weighted basis than it was in 2008, and yet the trade deficit was still a stubborn £36 billion last year—more than 2% of GDP.

Of course, as many noble Lords have pointed out, this is partly the result of a fundamental economic mismatch. Britain’s strength is in services; China’s hunger currently is for raw materials and machine tools. China seized 80% of the world’s metals supply last year, boosting exports from Australia in the process. The odd British firm, such as Rio Tinto, has cashed in, but countries such as Germany, whose firms sell kit used in Chinese factories, have done so very much better.

The prospects for British cultural exports are much brighter. However, as has been raised, there are real concerns about IP protection in China. In 2011, Britain’s global exports of TV formats—exciting programmes such as “Strictly Come Dancing” and “MasterChef”—were worth £1.5 billion. I hope that these figures will begin to attract more attention from UKTI, particularly in relation to developing economies and China.

However, the truth is that other countries appear to be taking better advantage of the shifts in China’s economy. I shall end with some questions for the Minister. As many noble Lords have mentioned, Britain seems to have gone out of its way to establish a reputation as a country hostile to business visitors, tourists and students. Visa processing is still slower than for the rest of the EU. As a result, London loses out to Paris as the place where wealthy Chinese like to go to shop. Visa restrictions hold back exports in more subtle ways, too. The Economist points out that Britain’s architectural practices, for example, often want to hire staff from the countries where they plan to bid for work, but this is almost impossible.

In 2011, the Prime Minister said that he wanted to double trade with China by 2015, but the gains that have been made are small. A much touted 2011 trade pact with China covered some 3% of the existing commerce between the two countries. Germany and China, for example, recently agreed on a deal which was 10 times bigger. Is the target set in 2011 still the one for which he is aiming?

My noble friend Lord Haskel mentioned that the warm public welcome for the Dalai Lama’s visit last year, which was largely arranged through No. 10, has not helped relations between the two countries. Like the noble Lord, Lord Watson, I would be grateful if the Minister would comment on that, particularly in the light of the rather underwhelming reception accorded to the Chancellor and the Mayor of London when they visited China recently.

Human rights concerns still affect our relationship with China. It is not just the regular house arrests but the lack of press freedom, the oppression of minorities and the fact that religious dissidents continue to be locked up. What representations have been made? What has the noble Lord said to his Chinese counterparts when he has led delegations to China? It would be interesting to reflect on that.

A continuous theme running through our discussions is that of language. How do we deal with that? How do we get people to speak Chinese? The Economist notes that whereas there is a network of trade envoys covering emerging and developing economies including Azerbaijan, Indonesia and Mexico, there is still no envoy for China. Is that the case? Will the Minister also comment on a long-promised agriculture attaché who apparently has still not been appointed?

Photo of Lord Green of Hurstpierpoint Lord Green of Hurstpierpoint The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills 2:23 pm, 7th November 2013

My Lords, I am very grateful to my noble friend Lord Dobbs for tabling today’s debate and for his very informed and insightful comments. Indeed, I thank all noble Lords for their very wide-ranging contributions. I pay especial tribute to my noble friend Lady Neville-Rolfe for her extremely insightful maiden speech, which focused particularly on conditions in China, as did the noble Lord, Lord Stevenson. I also pay tribute to my noble friend Lord Whitby for his insightful comments on what it is like at this end as Chinese investment transforms British economic conditions.

This is an extremely important topic for us all and a very complex one. We have covered a lot of ground in this debate and I will find it something of a challenge to respond to all the questions and summarise all the themes in the allotted time. I like to think that I have come and gone to China over a long time but I am humbled by the fact that the noble Lord, Lord Watson, first went there in 1977 and the noble Lord, Lord Haskel, who first went there in 1978. I am a mere newcomer, having first gone there in 1983. However, I think the thought resonates with all of us that this is a society and an economy that is changing rapidly and profoundly, and will continue to do so. The challenge posed by this enormous, sophisticated and cultured country, and our engagement with it, is of profound importance to British society and the economy.

As China continues to grow, so do our shared interests and responsibilities. Our relationship is broader and deeper now than at any time in our history. As I say, China is changing fast. I could go on at length but one manifestation of that change is that Chinese companies are increasingly going global and are on their way to establishing global brands rather in the way that the Japanese did after the war and South Korea more recently. China will be next.

China is also becoming more sophisticated in its own research and development. It now files the largest number of intellectual property patents of any country in the world. Interestingly, there are more cases of IP theft going through Chinese courts than in any other country in the world—some 84,000 in 2012, only 2% of which involved foreign companies. .In other words, China has got to the stage where IP is an issue for Chinese businesses dealing with Chinese businesses, which I think means that we can take some comfort that the authorities mean what they say and intend to create a robust environment which protects intellectual property and stamps out corruption and fraud.

China is changing in other ways, too. The international role of China is changing profoundly, as my noble friend Lord Howell of Guildford so articulately explained. This is a country that is taking its place on the world stage. We often talk about an emerging power. It is not an emerging power; it is re-emerging, or retaking its place on the world stage. I like to remind my colleagues in business that in 1820 China had the largest economy in the world and, 200 years on, it will be the largest economy in the world again.

China is also a country with a deep cultural past. As the right reverend Prelate the Bishop of Guildford reminded us, and others echoed, this is a country with a long-standing philosophical and religious perspective. I have met some of the characters mentioned by the right reverend Prelate and they are very remarkable people. The authorities are very keen to see a harmonious development of Chinese society and recognise the role that faith groups can play, particularly in an urbanised environment.

That brings me to my next point. China is not merely changing fast but urbanising fast. The figures are enormous. A number of speakers cited figures in relation to aspects of China’s growth. China has the most of almost everything these days, and the challenge posed to it by urbanisation over the next 20 to 30 years will be the biggest for any country, except possibly India. Something like 50% of its population live in cities now, but this will increase to 60% in as little as 20 years’ time. The implications for urban infrastructure, urban planning and the whole economy are profound. The rapid transformation presents enormous challenges for the Chinese authorities. Sometimes I think that the popular impression of China is that the authorities sit in Beijing smiling quietly as more and more Chinese companies invest and take over the world. That could not be further from the truth. The authorities are very conscious of the significant challenges of developing a very complex and large society, and of the need to rebalance. They are well aware that at the moment the Chinese economy is too dependent on investment and exports and needs to rebalance itself.

They are also well aware of the issues in the rural areas: poverty, issues of land ownership, the flow of immigration into the cities, which it is increasingly difficult to control, and so on. Demand for products and services like healthcare and education is expanding very rapidly and will continue to do so for the next generation. On the plus side of these challenges, a middle class is developing with the same sort of appetite for branded goods that we all take for granted. It is, therefore, no surprise that, as has been quoted, Jaguar Land Rover now finds China to be its largest market. Some 80,000 vehicles were sold there last year, and the number is growing rapidly. It is the second largest exporter of cars to China after BMW. So there are lots of challenges and plenty of opportunities, too.

Two important themes have dominated this debate and I will touch on both of them. The first is education and culture. My noble friend Lord Dobbs spoke about Chinese language tuition in schools and universities. I share his view of the importance of increasing the sensitivity of the younger generation in this country to Chinese, which is about both Chinese studies and Chinese languages. I am very pleased to report that my grandson is, almost exactly at this moment, doing a presentation on the warring kingdoms period of Chinese history. So he is being made to learn something about that great country.

The Government are committed to the learning of languages, including Chinese, in schools and universities. We undoubtedly start from a low base in the case of Chinese, but in 2013 the number of students entering for a GCSE in Chinese increased by 20% compared to the previous year and there were more than 3,000 A-level entries. It is a low base, but at least the direction of travel is right. In higher education, language study is about choice. We have seen some shifts towards languages that will better support employment outcomes in growth economies, including Chinese. In 2011-12 the number of students at UK higher education institutions taking Chinese studies was 1,870: a small number, again, but the direction of travel is good. It is important to note that there are many students not studying Chinese who increasingly get a component of Chinese studies as part of more multidisciplinary programmes. There are Chinese centres at Sheffield and Nottingham, to name but two.

There is plenty of work to do. My noble friend Lord Lexden and others, including the noble Baroness, Lady Dean, also pointed out the importance of education, not just at university but at school level. We recognise the importance of schools introducing children to Chinese at a young age and also the importance of being open to Chinese students wanting to come here at secondary and tertiary level. Another aspect of this is the importance of the engagement of British universities and other colleges in China. The noble Baroness, Lady Dean, referred to the work of Nottingham Ningbo. There are a number of other British colleges and universities: Dulwich College in Shanghai is just one of them. There are now some 230 research partnerships between British educational institutions and Chinese ones. We cannot be complacent about this. The noble Lord, Lord Stevenson, reminded us that the Chinese are rapidly upping their game and the old-fashioned notion that we have all the expertise and they have all the need is, frankly, behind us. We should recognise these as joint experiences: partnerships where we learn together about matters of importance to both our economies and societies.

There is plenty of competition in the English-speaking world. As my noble friend, Lady Warwick, said, the Australians have learnt the lessons of some of their mistakes. We must make sure we have a supportive approach to letting Chinese students, and others, into the British education system. We need to minimise the impact of immigration rules on universities. I have been asked in this House before whether I would take up the question of excluding students from the immigration numbers. In response to that suggestion, I have taken it up and am happy to have another go.

Another theme that came up repeatedly, not entirely unrelated to education, is visas. The noble Baroness, Lady Valentine, and others, drew attention to the ease with which you can get a Schengen visa. There is some mythology around the numbers of these visas and where people actually go. In his opening speech, my noble friend Lord Dodds said that seven times as many Chinese visitors go to France as to Britain. This is actually quite difficult to verify. One hard figure we do have is the number of visas issued. In 2012, the French issued 277,000 visit visas and we issued 210,000. So they issued one-third more than us rather than seven times more.

Chinese exit data on first destinations for Chinese travelling abroad show that the UK was the top European destination in 2010 and second to Italy in 2011. My general point is not that we should be complacent but that the numbers are quite hard to pin down. It is plain that we need to expect more and more Chinese visit visas over the coming years, both for tourism and for business and educational purposes. Specifically, we expect the number of visa applications to top 1 million by 2017. To facilitate that, and the processing of this very large increase in the number of applications, we introduced a number of measures.

Last month, in Beijing, the Chancellor of the Exchequer announced measures to streamline and simplify the visa process for Chinese nationals who want to visit the UK for business, study or pleasure. This includes plans to open a 24-hour visa service and streamlining the UK and Schengen visa application process. As the noble Baroness, Lady Valentine, pointed out, the Schengen process itself is moving—or so they claim—to biometrics, which will level the playing-field. I hope that we will increasingly be able to provide, in effect, a one-stop-shop service for Schengen and UK visas. We will, of course, always be left with the greater flexibility of Schengen. I suspect there is no one in this House who would argue for us joining the Schengen accord at the moment.

We will do our best on visas and I assure noble Lords that the Government recognise the importance of ensuring that the process works as seamlessly as possible. The forms are now in Mandarin, which was a good start. We now have more offices around China: more than the Schengen area does. Progress is being made in discussions with Schengen about how to converge the two processes as much as possible. I noted comments from a number of noble Lords on the importance of ensuring that the visa entry rules for both students and business are as business-friendly and education-friendly as we can make them. I am always happy—and so is UK Trade and Investment, the office which I oversee—to discuss any problems that specific institutions or firms have with getting people in, within the context of the overall policy. We are plainly not going to throw the whole policy up in the air but we need to make sure that, in practice, it works for business as seamlessly as possible.

I turn to inward investment, which is a very important topic for the economy in general. It is a great and long-standing competitive strength of this country that we are open for inward investment from all countries in the world. It is very difficult to imagine a number of our obvious competitors being as sanguine as we are about investment in, for example, the water supply of the national capital. Some 9% of Thames Water is owned by the Chinese sovereign wealth fund, as is 10% of Heathrow. We welcome these investments. We also welcome the deal announced by EDF in respect of Hinkley Point C, which is a good deal for this country. The entire nuclear industry, irrespective of who is investing in it and who is building it, needs to be properly regulated, for all the obvious reasons, but we are committed to the importance of nuclear as part of the energy mix. We have to invest substantially over the next 10 to 20 years in nuclear rebuild and we should welcome the involvement of foreign direct investment—including from China—so long as it is properly regulated and overseen.

The noble Lord, Lord Haskel, mentioned Chinese banks in London. The fact that we offered to allow them to operate through branches, as opposed to subsidiaries, does not mean that we are not going to regulate them, although they are, of course, regulated by the authorities in Beijing—not in Shanghai, incidentally—which would be the case whether or not they were subsidiaries or branches. They will also be regulated by the Prudential Regulatory Authority, whether they are subsidiaries or branches, according to the highest standards that the PRA thinks fit. I am very happy to assure the noble Lord on that point.

Huawei has already been discussed and I am not sure that I have anything useful to add to the exchange that has already taken place. I know the managers of that company, both here and in Shenzhen. I believe that they are committed to doing good business in this country and are certainly investing and building up the skill base in the way that my noble friend Lady Wheatcroft mentioned. All Members of the House will be aware of the security arrangements that are in place and are currently subject to review, following the report from the Intelligence and Security Select Committee.

I turn to exports, which are the other side of the coin. Every speaker has referred to the fact that we have a long way to go on this. We start from a low base and market share. I have always found completely unacceptable the notion of being behind not merely Germany, which is possibly understandable, but France and Italy. The good news is that we have now overtaken Italy. The good news is also that we have grown faster than all three of those countries for the past three years, but this is a long journey and we have to keep at it.

The importance of building relationships and making long-term commitments is something that everyone has underscored. It is true everywhere but it is certainly true in a country like China. Businesses need to spend time and need help. When it comes to small businesses, which were referred to by a number of noble Lords, it is important for the British Government to ensure that the role of UK Trade and Investment, working in partnership with the China-Britain Business Council, is as effective as possible in supporting those who make that journey by de-risking the decision for them and helping them to attend trade fairs. I am pleased to report that we have increased the number of resources we have on the ground in China, not merely in Beijing but around the country. We have increased the amount of money available for attendance at trade fairs and, by the way, we have increased the number of trade advisers in this country.

In respect of finance, we have substantially revamped UK Export Finance; it is not now the case that as few companies have been able to access UKEF as the noble Lord, Lord Stevenson, referred to. Indeed, its business is growing rapidly and I have asked it to triple its book over the next two or three years. I am afraid that I shall not be in office to see this happen but will be cheering from the sidelines. UKEF is now on the way and the momentum is clearly there. It now has more than £1 billion of support for small businesses, compared with almost nothing three years ago. So the direction of travel is there. We need to keep at this. It is a long journey, and we need to keep investing. I have mentioned UKTI and UK Export Finance.

In response to the noble Lord, Lord Wilson, I should like also to refer to the capabilities in the Foreign Office. We have 60 new staff working across the network in China, a third of them focused on less well known provinces and second-tier cities. I was recently in Wuhan, a city that we the British have neglected; the French are the dominant foreign presence there and we need to put that right. What is true of Wuhan will, frankly, be true of dozens of other cities. We have a long way to go. We have been investing in language training in the Foreign Office. I have some numbers somewhere that I cannot find, so I will write to the noble Lord, Lord Wilson, with the details. We have substantially increased the amount of Mandarin training in the Foreign Office because we fully endorse the notion that its officials are at their most effective if they can speak the language.

I will respond explicitly to some of the points made by the noble Lord, Lord Stevenson. I do not have the time to discuss Britain’s industrial strategy, except to say for the record that we the coalition believe that it is a coherent strategy that is bearing fruit, and we need to stick at it. We need to invest in the skills that equip the next generation to succeed in a competitive world. There is no turning back from this globalisation. There is no turning back from the challenge of ensuring that education and apprenticeship systems work correctly, that we connect up research and development at university level with businesses and that we invest in appropriate partnerships in key sectors. The sectors involved for the British economy are very wide—all the way from advanced manufacturing and aerospace, through IT, the creative industries and practically every sector in between.

Perhaps I may conclude with just 30 seconds on Hong Kong, as my time is up. Hong Kong remains extremely important to the British relationship with China generally, as well being important in its own right. I had the great honour of living in Hong Kong when the noble Lord, Lord Wilson, was governor there, and I have seen it change rapidly over the years. The closer economic partnership agreement is in place between Hong Kong and the mainland, which means that a company operating in Hong Kong can do business in the mainland without further restrictions, and several hundred British companies in Hong Kong have the opportunity of building their business in the mainland through the Hong Kong gateway. It is a very important asset in terms of the competitiveness of British businesses in China, when compared with that of our European counterparts and others.

Finally, I come back to the importance of this debate. No country is strategically more important to us than China. This is a long journey forwards in the relationship. It is a complex country and there are massive opportunities. Of course there are many political and economic challenges on the way through. The dialogue needs to be open, honest and continuous. Given that two or three of your Lordships quoted Mao’s saying that the longest journey begins with a single step, I should like to add another: this journey is a marathon, not a sprint.

Photo of Lord Dobbs Lord Dobbs Conservative 2:46 pm, 7th November 2013

I am delighted and honoured that the debate has been so fruitful; it has overflowed with experience, insight and enthusiasm. I thank every Member of this House who participated. My noble friend Lord Green’s summing up has been most helpful; he has been for so long at the sharp end of things and his time at the coalface has been hugely productive. He deserves his retirement but we shall miss him. I must once again congratulate my noble friends Lord Whitby and Lady Neville-Rolfe who made their first speeches in this House. But my friendly neighbourhood Whip has whispered in my ear—a loud Chinese whisper—that we are out of time. I must apologise, therefore, for being unable to refer to other individual contributions. I hope that noble Lords will understand and forgive me for that. The debate has been a credit to this House. Its messages were put quite superbly and came across loud and clear. The Chinese sometimes say that Britain is a small island, a long way away, which makes a lot of noise. It means at least that they hear us, and that sounds like a pretty good place to start—and also to stop. I beg to move.

Motion agreed.