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Last reviewed: 27 January 2009

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TRADE AND INVESTMENT

Trade & Investment Country Profile: China

Trade in goods

Bilateral trade between the UK and China is growing rapidly.  China has been the UK’s fastest growing export market since 2002 and in December 2007 became the largest export market in Asia for British goods.  In 2007, the UK exported £3.781 billion of goods to China, an increase of 16 per cent over the 2006 figures, and imported £18.795 billion, an increase of 23 per cent.  The UK is the EU’s fourth largest exporter of goods to China, behind Germany, France and Italy.

At present, the ratio of total bilateral trade in goods is currently almost 5 to 1 in China’s favour, reflecting China’s comparative advantage in low cost manufacturing.  However, over half of these exports are as a result of foreign (including British) business locating part of their global manufacturing chain in China.  This rises to 90% in high-tech sectors.

The UK’s main exports to China include power generating machinery, electrical and mechanical equipment precision instruments vehicles plastics, wood pulp and pharmaceuticals.  However, it is certain that the UK’s advanced engineering exports to China are higher than the figures show.  The reason is that exports in this sector include a significant components element, which is often exported to third countries to be included in finished items. For example, in 2006, the estimated value of UK components in Airbus planes sold to China was £900 million, and Rolls-Royce aero-engines on Boeing planes were approximately £50 million – meaning that UK exports to China for that year were almost £1 billion higher than they first appear.  Finished Airbus and Boeing planes are attributed to France and the US respectively.

Trade in service

At the time of writing, provisional 2007 figures for trade in services were available, although it is unlikely that the final figures will be significantly different.  These figures show that in 2007, the UK exported £1.536 billion of services to China, an increase of 6.3per cent on the previous year, whilst imports from China grew 0.4 per cent to 0.792 billion in the same period.  

Investment

It is probable that investment, rather than trade, is the preferred route into China for many UK companies.  The UK is the largest EU investor in China in terms of value, with nearly 6,000 British invested projects worth USD 15 billion by March 2008.  Again, the real figure is likely to be higher, as investments in the banking, insurance and securities sectors, where the UK is particularly strong, are not included.  

Examples of significant UK investments in China include RBS/Merrill Lynch’s USD 3.1 billion investment in the Bank of China, BP’s USD 2.5 billion Secco ethylene cracker plant in the Shanghai area and AstraZeneca’s Innovation Centre in Shanghai.  Vodafone is one of the top twenty foreign investors in China.  

Chinese companies are also increasingly investing overseas, and it has been estimated that London has attracted approximately 11 per cent of total Chinese investment in Europe.  As of July 2008, 372 Chinese companies have set up in the UK, with a significant number looking to establish European headquarters and research and development alliances.

See also the CBBC website.

Shanghai World Expo 2010

The Shanghai World Expo in 2010 will run for 6 months, from May to October 2010, attracting an anticipated 70 million visitors. Its overarching theme is “Better City, Better Life”. We plan to focus on sustainable development including renewable energy, urban regeneration and major global challenges like climate change. The UK pavilion will showcase UK science and technology, as well as promoting our wider economic interests in tourism, inward investment, financial and education services. Along with the Beijing Olympics in 2008, Expo is an historic opportunity to showcase China to the world, and for the UK to demonstrate our long-term commitment to partnership with China.

See also UK Shanghai World Expo page

Climate Change & Sustainable development

China’s energy consumption is increasing at a breakneck pace in order to service its economic growth. Some studies suggest that China overtook the US as the world’s largest emitter of Greenhouse Gases in 2007. It is currently the world’s second largest energy consumer (15.6% of world total).  Although tackling climate change remains a lesser priority for the Chinese Government than fast economic growth, it has set aggressive targets to reduce energy consumption for economic/energy security reasons, e.g. 20% improved energy efficiency and 10% reduction in emission of pollutants by 2010.  It aims to decrease its dependence on coal by increasing renewables to 16% of its energy mix by 2020.

The UK is working with China (through the UK-China Working Group on Climate Change and the UK-China Energy Working Group) to mitigate the effects of China’s predicted increase in energy consumption and help it make the transition towards a low carbon economy. During the Prime Minister’s visit to China in January 2008 a Joint Declaration on Climate Change signalled both sides’ desire to intensify action and to broaden the dialogue beyond government to include financial, energy, science, academic, technological and other sectors. The UK committed at least £50 million to be channelled through the Strategic Climate Fund announced at the G8 Summit in July 2008 to work with China to improve its energy efficiency and make the shift to low carbon investment. We are also working with China to achieve an ambitious post-Kyoto agreement.

UK Development Assistance

The Chinese government has made remarkable progress in lifting as many as 300 million people out of poverty since 1978. But there are still more than 160 million people in China who live on less than $1 per day (the international standard which defines absolute poverty) and up to 500 million on US$2 a day. The majority of the remaining poor are located in the Western provinces of China. The Department for International Development (DFID) is working with the Chinese Government to support their poverty reduction programmes.  DFID's programme in 2007/08 will be GBP 33.4 million. Funds are provided entirely on grant terms.  They are working to build a deepening relationship with China on international development issues, in line with the 8th Millennium Development Goal, which aims to "develop a global partnership for development".  Their main focus is on China's relations with Africa; aid harmonisation and effectiveness; facilitating learning from China's own experience in poverty reduction; and with the already existing UK/China dialogues on sustainable development,  climate change and energy security.  They work with China's own domestic programmes on basic education, HIV and AIDS, tuberculosis control, health systems reform and water and sanitation. These are areas where China faces particular challenges, and where DFID has a comparative advantage by virtue of its previous experience in these sectors in China. They work largely with the World Bank in implementing programmes. They expect to phase out this bilateral work by 2011.

After the earthquake in Sichuan province in June, DIFD provided £2.55 million to China towards the relief effort.

Education and Culture

The British Council, which operates as the Cultural and Education Section of the British Embassy in Beijing and the British Consulates-General in Shanghai, Guangzhou and Chongqing, has a wide-ranging programme of activity covering areas such as the arts, education, science and technology and good governance.

It is also active in promoting UK education. There are over 60,000 Chinese students studying in the UK, making China the leading provider of overseas students in the UK. The British Council also conducts over 60,000 English language examinations in China annually from a network of 21 test centres throughout the country.

The British Chevening Scholarships Programme for China (including Hong Kong) is by some margin the largest in the world.   In the year 2007/8 the number of Chevening Scholars came to more than 150.

In 2006 the Department Culture Media and Sport (DCMC), the FCO and British Council, with support from the Scottish Executive and the Chinese Ministry of Culture launched the Connections through Culture programme, a major initiative to broaden and deepen cultural linkages.

The China NOW festival, the largest ever festival of Chinese culture in the UK was launched in Feb and ran till the start of the Beijing Olympics.  

HUMAN RIGHTS

There has been significant progress on social and economic rights in China over the past 25 years: ordinary people can now usually travel freely and choose who to marry and where to work. But problems remain, particularly on civil and political rights.

Despite signing the International Covenant on Civil and Political Rights (ICCPR) in 1998, China has still not ratified it. China is making progress, but there remain a number of areas where it currently fails to meet ICCPR standards.

Rule of law is undermined by political interference in the judicial process. The system of Re-education through Labour and other forms of "administrative detention" remain in place, although its scope and the maximum length of sentences are being reduced. Torture is still a widespread problem. Senior leaders now appear to recognise it as such and are beginning to introduce measures that act as a bar on torture in practice (for example the tape recording of police interrogations).

The freedoms of expression, religion and association are severely restricted. However, China introduced on 1 January 2007 new regulations for foreign correspondents, who no longer have to seek case by case permission to conduct interviews. The regulations we made permanent on 17 October 2008. The development of civil society is limited, although the Chinese Government recognises the contribution NGOs have made to developing the market economy and social support services in China.

The use of the death penalty remains unacceptably high, although the Supreme People's Court now reviews all death sentences and there is some reason to believe that this has led to some reduction in its use. Tibet and Xinjiang are still subject to particularly repressive security regimes.

The UK takes a multi-layered approach to engaging China on human rights. We raise a broad range of human rights issues, together with certain individual cases, through our regular UK-China Human Rights Dialogue. The 17th  round of the Dialogue took place in London on 12-13 January 2009. The main themes raised were disability, mental health and China’s co-operation with international human rights mechanisms.

The Dialogue is just one strand of a much wider engagement that includes a growing portfolio of successful project work, ministerial and official exchanges. We also work through EU and international mechanisms, including the EU-China Human Rights Dialogue which took place most recently in Ljubljana on 15 May 2008, under the Slovenian presidency of the EU.

We regularly use our ministerial visits to raise human rights with the Chinese authorities at the highest levels. Foreign and Commonwealth Office Minister of State Bill Rammell raised Human Rights issues with Chinese Assistant Foreign Minister Wu Hongbo and Vice Minister Sita of the United Front Work Department on his visit in January 2009., the Prime Minister Gordon Brown also discussed human rights concerns with China’s President Hu Jintao and Premier Wen Jiabao on his visits to Beijing in January and August 2008. The Foreign Secretary David Miliband spoke on the same subject with his Chinese counterpart Yang Jiechi while in Beijing in February 2008 and October 2008.  Foreign and Commonwealth Office Minister Lord Malloch-Brown discussed human rights issues with Chinese ministers during his visit to Beijing as part of the Economic and Financial Dialogue in April 2008.

The Foreign and Commonwealth Office also provides funding for the Great Britain China Centre, founded in 1974, which promotes understanding between Britain and China, particularly in the areas of legal and labour reform. It manages exchange programmes with Chinese partners, provides information and advice about China, and publishes the quarterly magazine China Review.

Tibet

The British Government does not support Tibetan  independence, we regard Tibet as part of the People’s Republic of China. We regularly urge the Chinese Government to engage in serious negotiations with the Dalai Lama's representatives, without pre-conditions as we see this as the only lasting way to build a peaceful, sustainable and legitimate solution for Tibet.   The 8th round of talks were held between October 31 and November 5 2008, and ended without agreement.  We expressed our disappointment and urged both sides return to the negotiating table.

The Dalai Lama visited the UK in May 2008.  He met Prime Minister Gordon Brown at Lambeth Palace and discussed the situation in Tibet as well as other issues.  
More information on human rights in China, including Tibet, can be found in the Human Rights Annual Report 2007

Migration

We want more Chinese to come to the UK legally to visit, study and work, and are working on ways to make it easier for them to do so. But we also need to deter illegal immigration, and we are working with China to agree a durable system for returning illegal immigrants.

TAIWAN

Taiwan and Penghu (Pescadores) Islands were ceded to Japan following China's defeat in the Sino-Japanese War in 1895. They remained under Japanese rule until Japan's surrender in 1945, when they were occupied by Chinese Nationalist (KMT) forces. Following the Nationalists' defeat on the mainland, the Nationalist government and two million supporters fled to Taiwan. The Nationalist administration on Taiwan maintained its claim to be the legitimate government of the whole of China and set up a national central government on the island.

Reunification with Taiwan remains one of the Chinese government's key objectives. Although China has sought reunification through negotiation, it has not renounced the threat of military action against Taiwan, as codified in March 2005 in its Anti Secession Law. During Chen Shui-bian's eight year administration in Taiwan, relations between Taiwan and China deteriorated significantly as he pushed through measures to increase a separate sense of identity among the people and institutions of Taiwan.  The inauguration of a new Taiwanese administration in May 2008 has led to increased dialogue between China and Taiwan. Practical results seen so far include the regular, direct  flights and cargo routes between mainland China and Taiwan. 

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