House of Lords 19 July 2012 Growing East: A Strategy for Manchesters Engagement with China.

House of Lords

19 July 2012

Growing East: A Strategy for Manchester’s Engagement with China

Why China & Greater Manchester?

– China – strong growth despite global downturn

– Chinese economy will double every 5–7 years– 350 million people in cities by 2020– 221 cities will have 1million+ people by 2025– GDP will have multiplied 5x by 2025

– GM & UK as a whole – in period of low growth

– GM is looking at developing growth markets & attracting new investment – China is key to this

Context to today

– Preliminary report – informed by 3 months of research and interviews in GM & China

– Sets out findings & recommendations for GM to Grow East & benefit from China’s “Going Out” strategy

– It isn’t just another strategy

– It calls for stakeholders to work with us to refine the recommendations & move to action in a private sector and Chinese diaspora-led relational way

Priorities for today

– “Growing East” – Report overview:

– Approach to China

– What businesses want in China

– What businesses want in GM

– Recommendations to “Grow East”

Agenda

– 1.00pm – Welcome & lunch

– 1.30–1.40pm – Introduction

– 1.40–3.00pm – “Growing East” – Report overview

– 3.00–3.15pm – Coffee Break

– 3.15–4.30pm – The Manchester–China Proposition

– 4.30–5.00pm – Round Table Discussion

Agenda

– 1.00–1:30pm – Welcome and lunch

– 1.30–1.40pm – Introduction

– 1.40–3.00pm – “Growing East” – Report overview

– 3.00–3.15pm – Coffee Break

– 3.15–4.30pm – The Manchester–China Proposition

– 4.30–5.00pm – Round Table Discussion

Approach to China

– Any approach to “Growing East” must:

– Break the cultural distance

– Be integrated

– Coordinate activities in close partnership with UKTI & the CBBC

– Build on GM’s strengths (brands, universities, businesses) & civic links with China

Approach to China

– There are a number of routes for GM to forge economic links with China:– Traditional route through

trade bodies (e.g. UKTI, CBBC)

– Civic links– Partner with cities that play a

“hub” role– Either way, key is to building

relationships/partnerships at province levels and not constraining GM with mutually exclusive relationships with cities

Approach to China

– We need to identify cities interested in advanced cooperation with Greater Manchester in sectors such as health, financial services & investment, the environment, creative industries, & the service sector generally

– Agents & staff need to located in places that are equidistant from these cities (e.g. by high-speed train), which can act as gateways & access points

– While we will need to work closely with Beijing, Shanghai & Hong Kong/Shenzhen as Tier 1 hubs, we will in parallel need to work with the River Delta regions to access other cities

Approach to China– The Pearl River and

Yangtze River Delta regions offer fertile grounds to find these cities in given the bulk of wealth &sources of potential investment that reside in these

Approach to China

– In the Pearl River Delta area, it is advised to work closely with the leadership of Guangxi Province, whose capital is Nanning, to provide access to a cluster of cities such as neighbouring Guangdong's capital Guangzhou

– Other factors supporting this are:– Surveyed Chinese entrepreneurs recognise GM– Nanning is the Central Asia capital for ASEAN– Nanning is expanding land & sea links with Southeast Asia– Nanning Wuxu International Airport being expanded over the coming

years– They a civic relationship with Trafford

Approach to China

– In the Yangtze River Delta area, candidate cities for locating in and partnering with would be in the Zhejiang Province, which covers a stretch between Shanghai & Hangzhou, two of the wealthiest cities in the area, & about half an hour by train from both

– Hangzhou is the capital city of Zhejiang, which is known for being a wealthy, investor-rich region

– Other factors supporting this are:– They are well known as being a source of entrepreneurs & investors

who power much of China's growth & are international in outlook– Zhejiang has strengths in highly complementary areas to Greater

Manchester, such as healthcare, light manufacturing, textiles, & advanced technology

– They have a civic relationship with Bolton

What businesses want in China

– A survey in China undertaken in the second quarter of 2012, led by Chris Zhang, Hannah Liu & Sinotrace

– Interviewed senior managers & decision makers from 150 businesses (local, national, and global) across 5 cities (Guangzhou, Tianjin, Hangzhou, Chengdu and Nanning –30 per city) & across different industries

– Number of employees in the businesses interviewed >150 people

– Turnover for the businesses interviewed >RMB30million

– Businesses interviewed had been in operation for >3 years

What businesses want in China

– We learnt:

– Football is the number one phenomenon associated with GM, followed by tourism & culture

– Awareness of GM is higher in some cities than others (e.g. Nanning versus Hangzhou & Guangzhou) with football, the Olympics, & tourism being the most common associations

– Cities which have a greater proportion of former students or citizens from the UK tend to have a greater interest in trading with the UK & GM

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Belfas

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10%

20%

30%

40%

50%

60%

70%

80%

90%

100% 98%

73% 71%

59%

53%

42%

33% 32%28%

Awareness of UK cities amongst surveyed

businesses in China

What businesses want in China

– A lack of understanding of local conditions, regulations & the local policy context, together with a lack of capital to invest or operate internationally were the three biggest barriers to Chinese firms engaging with GM & the UK generally

– The main way businesses in China find out about GM is through existing business partners, followed by the Internet, & then friends/family/trusted associates/professionals (e.g. lawyers & accountants)

– The two top facts about Greater Manchester that made business leaders surveyed more willing to trade included the fact that it receives nearly 100million tourist visitors a year & that over 2,000 foreign enterprises have located there

– Tax incentives, local connections, & the strengths of the local economy tend to increase Chinese firms’ willingness to work with a particular city in the UK

What businesses want in China– Manufacturing and financial & professional services were the industries in

Greater Manchester of most interest to the businesses surveyed

Industries in Greater Manchester of business interest to the businesses surveyed in China

Greater Manchester Economy

Source: Yale University Geocon Project

– Most significant UK economic agglomeration outside London

A Growing Population

96.0

98.0

100.0

102.0

104.0

106.0

108.0

2,400,000

2,450,000

2,500,000

2,550,000

2,600,000

2,650,000

2,700,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Po

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on

Ch

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(20

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= 1

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)

To

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Population Change in Greater Manchester

Population Population change (2000 = 100)

Key Business Sectors in Manchester• 163,000 jobs, GVA of £4.7bn p.a.• Manchester Science Park, Christie Hospital, UK Biobank

Health & Life Sciences

• 224,000 jobs, GVA of £9.0bn p.a.• Deloitte, KPMG, PwC, etc.

Financial & Professional Services

• 105,000 jobs, GVA of £4.7bn p.a.• MediaCityUK, Sharp Project

Creative & Digital

• 105,000 jobs, GVA of £3.0bn p.a.• 5 universities, Graphene hub, 100,000+ students

Education

• 21,000 jobs, GVA of £0.5bn p.a.• Man City, Man Utd, Adidas, Umbro

Sport

• 38,000 jobs, GVA of £1.9bn p.a.• NXP, Siemens, Holroyd Precision

Advanced Manufacturing

High Growth

( >10%, 01-11)

Growth

(<10%, 01-11)

Decline

(<10%, 01-11)

High Decline

(>10%, 01-11)

Business Services (19.3%)

Distribution and Retail (17%)

Health (13.0%)

Manufact-uring

(9.7%)

Education (9.3%)

Transport and

Comms (6.2%)

Hotels and

Catering (5.6%)

Public Admin (5.6%)Other

Personal Services

(5.5%)

Utilities (0.7%)

Mining (>0.1%)

Financial Services (4%)

Construction(4.1%)

Business Engagement

– Top 150 survey

– GM-wide survey – representative sample of 2,500 businesses

– Key account managers for major businesses in GM

– GM firms engaging with Chinese companies

Business Interest in the BRICs

74%

70%

52%

48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

China India Russia Brazil

Level of interest amongst surveyed businesses with BRIC or emerging economy countries

What businesses want in Manchester– We learnt:

– Employment of Chinese in Greater Manchester businesses appeared to be limited so far to a handful of firms

– Businesses & GM’s Universities were most interested in direct flights to China from Manchester Airport as a priority

– The spread of industries engaged with China among Greater Manchester businesses were varied, but tended to cluster around trade, manufacturing supply, and professional & financial services

– The environmental & energy sectors were indicated as areas for innovation & potential future growth & and were also identified as priorities for Chinese firms and investors

Recommendations

– It is clear that an integrated strategy is needed for GM if it is to increase its engagement with China & “Grow East”

– Given Greater Manchester’s civic links with China, its large Chinese community (second largest outside London), its universities, & its businesses with a strong appetite to work with China, now is the perfect time for it to capitalise on China’s “Going Out” strategy & fully commit to “Growing East”

– The following recommendations seek to help manage the risks involved, & make it easier for businesses to achieve what they want to achieve in close partnership with UKTI & the CBBC

– BUT … they need to be built collaboratively with you!

GM–China

Specialised Research

Trade missions

Presence on the ground

IntelligenceLanguage services 24/7

Specialist advice e.g. immigration,

tax & IP

Lobbying, incl. using HMG

– Key elements could include …

Key Recommendations

1

•Establish a Manchester–China Forum to provide focus & coordination

2

•Create a unit focussed on two-way supply chain analysis & coordination between large & small firms

3

•Establish a unit to identify & engage incoming visitors & students & ensure they have the support & welcome they need as well as staying in touch with them when they return

4

•Cultivate the development of private sector-led centres to act as digital & physical gateways between GM & different parts of China

5

•Work with other UK cities to establish a UK–China City Leaders Forum

Agenda

– 1.00–1:30pm – Welcome and lunch

– 1.30–1.40pm – Introduction

– 1.40–3.00pm – “Growing East” – Report overview

– 3.00–3.15pm – Coffee Break

– 3.15–4.30pm – The Manchester–China Proposition

– 4.30–5.00pm – Round Table Discussion

Agenda

– 1.00–1:30pm – Welcome and lunch

– 1.30–1.40pm – Introduction

– 1.40–3.00pm – “Growing East” – Report overview

– 3.00–3.15pm – Coffee Break

– 3.15–4.30pm – The Manchester–China Proposition

– 4.30–5.00pm – Round Table Discussion

The Manchester–China Proposition

1. Establish a Manchester-China Forum to provide focus and coordination

– Existing engagements are highly fragmented

– Lack of resource to execute any transformative strategy on enlarging trade, investment & connectivity with China

– Therefore – creation of forum led by private partners• Providing a focal point for feedback & ideas• Mechanism to call for incentives & conditions to improve investment• National & local connectivity/coordination

The Manchester–China Proposition

2. Create a unit focused on two-way supply chain analysis & coordination between large & small firms

– Learning from best practice – Germany • Develop intensity of relationships with GM firms that do business

with China• Identify other large UK firms with existing Chinese

operations/investments• Helping GM businesses gain supplier contracts

– Work with Chinese firms looking to carry out activities in GM• Once 1–2 major firms invest in GM, opportunities for others will

follow

The Manchester–China Proposition

3. Establish a unit to identify & engage incoming visitors & students & ensure they have the support & welcome they need as well as staying in touch with them when they return

– Major assets in GM – football, Chinese diaspora, universities

– Unit should be established to better connect with these assets• Communicating with all incoming Chinese• Identify & engage inbound & outbound Chinese activities• GM champions for China

The Manchester–China Proposition

4. Cultivate the development of private sector-led centres to act as digital & physical gateways between GM & different parts of China

– Physical/cultural distance & China’s size/complexity will always remain a challenge

– Development of gateways to China:• Especially river delta regions – incl. Zhejiang & Guanxi• Using technology to overcome barriers of distance• Specialists/linguists to overcome cultural barriers• Spearheading key messages about GM as a place

The Manchester–China Proposition

5. Work with other UK cities to establish a UK–China City Leaders Forum

– To connect different parts of China with other parts of the UK

– The concept:• Once a year, UK hosts City Leaders & businesses from China who

are interested in coming to the UK• Process repeated in year 2 on a rotating basis• Manchester hosts first Forum in 2014

– Run & delivered through private sector sponsorship

Other Potential Components

Some ideas for further discussion:

– High-profile student scheme – the “Rhodes

Scholarship”

– Direct flights

– 24/7 language services

– Virtual learning/virtual investment park

– ...

Agenda

– 1.00–1:30pm – Welcome and lunch

– 1.30–1.40pm – Introduction

– 1.40–3.00pm – “Growing East” – Report overview

– 3.00–3.15pm – Coffee Break

– 3.15–4.30pm – The Manchester–China Proposition

– 4.30–5.00pm – Round Table Discussion

For Discussion

– Taking the recommendations forward:

– Is the report and strategy taking us in the right direction?– On the basis of what is planned:

• Relationships need to be built with the said provinces & cities• Lord Wei to begin this process in September on a visit to China

– Working group to be established to build the Manchester–China Forum (Rec. 1)

– Another working group to fund, pilot and test the Gateway recommendation (Rec. 4)

– One other working group needed to focus on delivering the UK City Leaders Forum in 2013 (Rec. 5)

THANK YOU