UK companies networking to lure investment from China

Local governments in Britain vie with each other to attract financing from the East

On a snowy day in late March, a Chinese flag flew high outside the rural Welsh county of Flintshire's local government offices. Standing there to welcome their Chinese guests was a large group of locally respected figures and government officials, including a sheriff and a lord.

The special occasion marked the first visit to Flintshire by a group of representatives from the Chinese embassy in the United Kingdom. Determined to attract Chinese investment into the local economy, the Flintshire hosts proudly showed their guests the best of their local specialties, from castles and cheese to advanced manufacturing factories, offshore wind farms and an optoelectronics technology incubation center.

The scenes reflect that more regional governments in the UK are increasingly keen to build business relationships with China, as they realize that the central government's efforts are often more beneficial to the better known cities.

"I think we are very pragmatic in recognizing the economic challenges of the UK, and it's very important to recognize the importance of growing markets like China," said Aaron Shotton, leader of Flintshire County Council.

The Chinese delegation was led by Zhou Xiaoming, minister counselor for economic and commercial affairs at the Chinese embassy in the UK. Zhou said he has received several such invitations from local governments in the UK that are keen on attracting Chinese investment. He has visited a number of them, including Southampton, Leeds, Manchester, Birmingham and Chester to gain a better understanding of local opportunities available to Chinese companies.

One of the investment opportunities Shotton's team showed to Zhou was for Chinese companies to set up shop at the Deeside Enterprise Zone, an advanced manufacturing hub designated as one of five special areas for businesses to receive capital investment tax allowances in Wales last year.

The hub was formed in the early 1980s, when the Flintshire authorities implemented dramatic measures to attract inward investment after about 6,500 jobs in the county were lost during the collapse of Britain's coal and steel industries.

The redundancies in Flintshire created a surplus of a highly skilled manufacturing workers, which coupled with relatively cheap land costs and a welcoming local government successfully attracted investment from several multinational giants including Tata Steel, JCB, Airbus and Toyota.

For a county of 150,000, such an achievement is remarkable. But Shotton's team now envisages a "second phase" of inward investment with greater focus on emerging markets like China.

One motive behind this push is the hope that a government-to-government relationship may help local businesses that already have a China link to make new breakthroughs.

One such company is Flintshire-based SmartKem, a manufacturer of flexible and plastic electronic displays used in applications such as e-readers and smartphones. Having established a representative office in Hong Kong last year, SmartKem is currently in discussions with many potential Chinese customers. It plans to set up manufacturing capacity in China during its next stage of development, and hopes to find a suitable Chinese partner for the manufacturing.

Another example is EA Technology, which established a representative office in Shanghai in 2009 to sell monitoring devices that detect faults inside power generating machines. It now generates over $1.5 million of sales from China annually, with ambitions for much more, to make the best of China's large energy market.

Other companies in Flintshire are looking to work with Chinese companies in Europe. One example is Comtek Communications, a developer and manufacturer of specialty wireless communications equipment, which hopes to work with Chinese telecommunications companies like Huawei Technologies Co Ltd on network projects in Europe.

"It is so exciting to see Chinese telecommunications companies growing at such an incredible speed and winning so many contracts in Europe. We are very keen to provide them with specialist support services," said Askar Sheibani, chief executive of Comtek.

Sheibani said his sales team has already had frequent meetings with staff at Huawei's UK subsidiary, but no agreement has yet been reached.

"One challenge is the lack of access to the key decision makers at Huawei. And we are really hoping that the Chinese embassy can help us with this," Sheibani said.

Having heard the aspirations of Flintshire businesses like SmartKem, EA Technology and Comtek, Zhou said he is more than happy to help.

"I knew very little about Flintshire before my visit, but when I came here, I was pleasantly surprised to find the range of advanced manufacturing and technology businesses already operating here. I believe the potential for its cooperation with China is huge," Zhou said.

Even if Zhou had very little knowledge about Flintshire before his visit, it is easy to imagine that many Chinese investors may have never heard of the place, despite the wealth of opportunities the county offers.

This paradox highlights a challenge faced by many UK local governments for resource constraints, meaning they can hardly promote themselves overseas.