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CHAPTER SIX: EXPANDING BUSINESS LINKS BETWEEN SCOTLAND AND CHINA
6.1 Objective 8 of the China Strategy is to expand connections between businesses in Scotland and China. These connections take several forms, including direct trading links, direct investment, alliances and joint ventures, and licensing agreements - located both in Scotland and China.
6.2 To help inform work relating to this objective, this chapter presents relevant findings from research among Chinese business audiences, specifically business people representing larger firms and local government officials responsible for business development in their respective provinces. The chapter begins by considering current and future overseas business activity in the target provinces, before going on to explore awareness and perceptions of the UK and Scotland as locations for business.
Summary of findings |
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The majority of the business people who took part in the research anticipated that their companies would expand into other countries in the future. Specific, potential markets mentioned included several countries in Southeast Asia, but also the UK and USA. For the business people interviewed, the most important factors when judging countries as a potential location for business were: market opportunities, economic and political stability, cost efficiencies and tax regimes. Very few of the business audiences had any awareness of Scotland as a location for business. Indeed, there was a perception that the country is more a place to relax than somewhere to do business. |
Current and future overseas business activity
Current activity
6.3 Around three in five (64%) of the business people interviewed in the telephone survey said that their company currently does business overseas. The figure varied somewhat across the target provinces, falling to 59% in Taiyuan, 45% in Beijing and rising to 80% in Hong Kong. Elsewhere the figure was more in line with the average.
6.4 Asked where overseas their company does business, a majority (63%) mentioned Asia, with 22% specifying Japan, 12% Korea, 9% Singapore and 6% Malaysia. Just over half mentioned Europe, with Britain, Germany, France and Italy respectively emerging as the top locations (mentioned by 17%, 16%, 14% and 6%). The USA was mentioned by 41%, Canada and Australia each by 10% and Africa countries by 8%.
6.5 Although sample sizes preclude analysis of these findings at the regional level, the interviews with government officials provided some insight into how companies' overseas foci vary across the provinces. The officials noted that companies in developed cities (Hong Kong, Beijing, Shanghai and Guangdong) tend to focus their activities primarily in Western developed nations, whereas those in inland cities (Chengdu, Shandong and Taiyuan) have more of a presence in Southeast Asia. Comments made by business people themselves confirmed this summation.
We cannot compare with the developed countries but we are better than the Third Word countries. We have co-operation with these countries, such as countries in Africa.
(Business person)
We would enter the Southeast Asian countries as a first step.
(Business person)
Future expansion prospects
6.6 The government officials anticipated the rapid growth and expansion of businesses in their respective provinces. Those representing Hong Kong, Beijing, Shanghai and Guangdong said that the key growth sectors in their provinces were finance and information technology. Meanwhile, those representing the inland provinces said that, in these places, manufacturing remained the most important, and the most rapidly expanding sector. There was a consensus that, across China, business growth would be reflected in an increase in overseas business activities.
6.7 Consistent with these views, 84% of the business people surveyed believed that their companies would expand into other countries in the future. Again, and as Figure 6.1 below shows, the figure varied between the provinces, rising to 100% in Beijing, but falling to 60% in Hong Kong.
Figure 6.1: Likelihood of companies expanding overseas, by province
Q Do you envisage your company expanding into other countries in the future
Base: All business people interviewed by telephone (215), Fieldwork dates: October 23 to November 7, 2006
Source: Ipsos MORI
6.8 Asked to where their company might expand, around half (48%) again mentioned Asia, with 14% specifying Japan, 10% Korea, 9% Southeast Asia generally, 7% Singapore, 6% India and 6% Thailand. Meanwhile, around a third mentioned Europe or a specific European country, with 11% saying the UK, 4% saying France, 3% Germany, 3% Russia and 2% Italy. The USA was mentioned by 12%, African nations by 9% and Canada and Australia by 3% each. No other single country was mentioned by more than 3% of respondents.
Key considerations in identifying potential locations for overseas business
6.9 The respondents were asked, unprompted, what the most important factors were to them when judging countries as potential locations for business. Among the business people, the top responses were market opportunities (mentioned by 58%), and economic and political stability (mentioned by 50% and 35% respectively). Other important considerations included cost efficiencies (17%) and tax regimes (6%) (see Figure 6.2 below).
Figure 6.2: Key factors in identifying potential locations for overseas business
Q What are the most important factors you take into account when making judgements about countries as potential locations for your business operations?
Base: All businesses interviewed by telephone (215), Fieldwork dates: October 23 - November 7, 2006
Source: Ipsos MORI
6.10 These considerations were echoed by the government officials.
The investment environment is the most important, other things are secondary.
(Government official)
Barriers to overseas development
6.11 The government officials were asked if they felt the companies in their respective provinces faced any barriers in terms of overseas business development. A number of issues were mentioned, most of which related to factors within China. They included:
- Restrictive customs policies
- High customs taxes
- Risks associated with doing business with foreign currencies
- The tendency for Chinese products to be less advanced than those developed elsewhere
- Trading barriers
Sources of information on potential locations for overseas business
6.12 Asked where they obtain information on potential locations for business, the business people mentioned multiple sources, including the internet (mentioned by 42%), market research and industry surveys (27%), country visits (19%), overseas contacts (18%) and newspapers (15%) (Figure 6.3 below).
Figure 6.3: Sources of information on potential location for overseas business
Q Which sources of information would you say are most useful to you when investigating countries as potential locations for your business operations?
Base: All business people interviewed by telephone (215), Fieldwork dates: October 22 - November 7, 2006
Source: Ipsos MORI
6.13 The government officials similarly mentioned the internet and personal visits, but of equal importance to this group were exhibitions by overseas countries, the Chamber of Commerce, and business agents.
Perceptions of the UK and Scotland as business locations
The UK
6.14 Respondents were fairly familiar with the UK as a business location. Indeed, they regarded the country as one of the most attractive markets in Europe, together with Germany, Italy and France. Specific, perceived strengths of the UK were its:
- Policies towards business
- Investment environment
- Leading technologies
- Leading management systems
- Leading industries
- Stable markets
I have not been to the UK but I know the level of the technology there has improved. I feel that they can provide very good devices and equipment in the medical area.
(Business person)
The UK has a stable economy; it is a well developed country. They have done something about environmental protection recently.
(Business person)
It has an established economic system. There are some leading industries in the UK.
(Government official)
6.15 Perceived weaknesses of the UK as a business location were that:
- It can be conservative
- Its trading policies prevent some Chinese products, such as clothing, from entering the country
- Business costs can be high
The cost of labour and production are very expensive
(Government official)
Scotland
6.16 Among some respondents, there was a clear perception that business in the UK tends to be concentrated in larger cities, particularly London, as other parts of the country are not as well developed. Reflecting this, awareness of Scotland as a business location was fairly low.
6.17 As Figure 6.4 (below) shows, almost three-quarters of the business people who were surveyed said they knew very little or nothing about Scotland as a business location while a fifth said they knew a little and just 7% (15 respondents) knew Scotland fairly well in this regard. None said they knew the country very well as a business location. Reinforcing other findings, there was a sense in which Scotland is seen as a place to relax, rather than somewhere to do business.
Figure 6.4: Awareness of Scotland as a business location
Q How familiar would you say you are with Scotland as a location for business?
Base: All business people interviewed by telephone who know at least a little about Scotland (209), Fieldwork dates: October 23 - 7 November, 2006
Source: Ipsos MORI
The economy is concentrated in the big cities, such as London. The other regions are not developed enough.
(Business person)
According to what I know, most of the businessmen who have investments in the UK will be located in England. Few of them will go to Scotland.
(Government official)
Scotland is a place for relaxing.
(Government official)
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