Partnership for prosperity

Companies in northeast England are putting a concerted effort into doing business with China

Cities in northeast England are collectively strengthening their ties with China, using their industrial and advanced technology strength to fuel China's economic growth.

The region, home to much of England's Industrial Revolution, boasts excellent manufacturing and engineering strength and skills. As well, the northeast's strong education is also attracting many Chinese students and joint research projects.

The government agency UK Trade and Investment says the region has three percent of the active enterprises in England, that its exports were worth 12 billion pounds ($19.6 billion; 15.3 billion euros) last year, and that it is the only English region with a positive balance of trade, of a little more than 4 billion pounds.

Despite the great number of export businesses in the region, exports to China still rank 16th out of all the countries the region exports to, but this trend is now changing as local businesses are increasingly realizing the huge market in China.

One company making huge inroads in China is Palintest, of Gateshead, Tyne and Wear, which makes advanced water and environmental testing equipment and exports it to more than 100 countries.

It entered China about eight years ago and now has eight employees - three technical staff and five sales staff - in regions where it has offices, in Beijing, Shanghai, Guangzhou, Shenyang and Chengdu.

"We have developed a range of products specifically designed to meet the requirements of local Chinese applications," says Managing Director Dave Sidlow, adding that the value of Palintest's sales in China is on target to reach 1 million pounds this year.

In China, Palintest focuses on testing the quality of water for rural water projects, public swimming pools and aquatic facilities, domestic water purification system suppliers, industrial effluent, environmental protection and bottled water.

During the Beijing Olympics in 2008, Palintest helped to test the quality of the water in the swimming pools used by the athletes.

Sidlow says one major project Palintest is working on is testing the quality of rural drinking water. His team is discussing sales of water testing equipment with rural governments.

"As a part of the Chinese government's latest five-year plan (2011-15), improving rural water supply quality is said to be an important goal. Many rural governments are investing heavily in improving water quality, and our equipment can help them measure progress."

Sidlow says China is Palintest's third-largest export market, but it is probably the fastest-growing market. Seventy percent of Palintest's sales are generated from exports, and last year the company received The Queen's Award for International Trade.

Another manufacturing company making great progress in China is Cottam Brush, of South Tyneside, which makes brushes of all types, from domestic to high tech for oil and gas. Established as a family business in 1958, the company has used a Chinese supply chain in recent years as its business has grown.

"We outgrew our manufacturing capability, so we've decided that for the work we are unable to manufacture in the UK we will ask our Chinese suppliers to do it," says Managing Director Ben Cottam.

"We went to China for its manufacturing capability, as I think no matter what type of product we wanted, we can always find someone in China to do it. The cost of manufacturing in China is not high also."

About one third of Cottam Brush products are made in China, he says.

Cottam says his team works with a Chinese partner who helps to find the appropriate manufacturer for each type of product.

His UK team does the design, communicates the concept with the Chinese manufacturer and monitors their progress in making the first samples of product to ensure quality.

Most of the high-technology brushes that customers need in small quantity are still made in the UK, Cottam says, whereas mass production brushes can be made more efficiently in China.

Miller International Ltd of Northumberland is another manufacturer that has achieved success in China. Founded in 1978 as a welding and repair service for quarries, mines and open cast coal sites, the company has grown over the years to become a global business.

Today the company makes a wide range of products including quick-hitch couplers, hydraulic breakers, buckets and mining equipment. It has a manufacturing site in both northeast England and in Zhangjiakou, Hebei province.

Gary Miller, main board member of Miller, says his team decided to establish a manufacturing site in China because the growing scale of the business has meant that it wanted to shift from a manufacturing model of welding to casting and could not find a suitable partner in the UK to take on the casting task.

Different from welding, which joins metal under high heat, casting makes a mold to create new equipment from scratch. Casting allows quicker and larger-scale production of industrial equipment.

Unable to find a suitable UK partner, Miller then went to China to establish a joint venture, which has worked well in producing high quality tools.

Ford Aerospace Ltd of Hebburn, Tyne and Wear, a supplier of precision machined or pressed components and assemblies to high technology industries, is also considering setting up a joint venture in China to do production.

Dou Tsang, sales and export coordinator at Ford, says the company's high-precision tools are in great demand from Chinese aviation and high-speed train companies, and it is now working with China CSR Corporation Ltd and China CNR Corporation.

Ford now has two distributors in China, but Tsang says the team is looking to establish a joint venture to expand in the Chinese market quickly.

"We hope to manufacture some of our products in China so costs can be lowered, but also we can sell our products to some Chinese military sector clients who are not allowed to buy foreign manufactured products," Tsang says.

Northeast England is also strong in the energy sector, and especially offshore wind energy as much of the region is coastal.

Offshore Renewable Energy Catapult in Blyth, Northumberland, one of the cluster of seven UK government-owned technology innovation centers, hopes to work as a partner with Chinese companies on offshore energy supply chain development.

"The development of a robust international supply chain is important, and our organization is a potential gateway for Chinese companies, particularly those who are technology focused," says John Watson, business development manager of ORE Catapult.

At ORE Catapult, companies can make use of the center's world-class research, development, demonstration and testing facilities, with the goal of lowering the cost of renewable energy.

China's energy sector's vast potential in hydraulic fracturing, or fracking, has given Rotary Power of Newcastle upon Tyne great business opportunities, as the engineering company has already given its hydraulic motors to several Chinese companies to test in their fracking systems.

The company, founded in 1976, has a factory of 15,000 square meters in South Tyneside, and makes 7,000 motors a year.

Normally fracking systems take about three years to develop, so by allowing Chinese energy companies to try its equipment early, its motors may be able to enter the market, says Philip Bartin, commercial engineer at Rotary Power.

"The drive for shale gas extraction in China is moving at a very quick pace, and I'm working to position Rotary Power at the forefront of this industry."

The vibrant links established between northeast England and China are facilitated by informed advisers, including the China Britain Business Council and UK Trade and Investment. In May, UK Trade and Investment led a business delegation to Shanghai and next month it will organize another one to Shanghai and Chengdu.

UKTI also organizes meetings for companies to talk about their experience and discuss a topic. Topics touched on this year include "Growth prospects in the regions of China" and "Agents and distributors".

Zhou Xiaoming, minister counselor with the economic and commercial office at the Chinese embassy in London, has expressed willingness to help businesses in northeast England expand in China.

In August he led a delegation to visit Newcastle, Sunderland and Durham to learn more about the achievements of local businesses in China and the challenges they still face.

As well as visiting the manufacturing facilities of several local companies, Zhou's delegation also attended a roundtable discussion with about 20 companies in the region, and answered their questions about doing business in China.

Zhou said he is impressed with the achievements of the local businesses in China and will help to connect them with Chinese companies in the same industry so that potential partnerships can be established.

He also suggested the model of mergers and acquisitions as a way of expanding in China, because a big wave of Chinese companies is now expanding into the UK by becoming majority shareholders of local companies, and helping them expand in China, too.

"Chinese companies are different from private equity funds when doing M&A because they focus on the long term and they really appreciate the technology capability of the companies they acquire, and want to preserve this," Zhou said.

"They often invest capital in the companies they acquire, allow them to grow and help them to tackle the Chinese market, so it is really a win- win partnership."

After speaking with representatives from several universities, and visiting some of the universities' research faculties, Zhou said he is impressed with the research capabilities he has seen.

"At the moment some universities, including Nottingham and Imperial, have already partnered with Chinese companies to carry out research. As China industrializes, its companies will have a lot more demand for top quality research, and this can create great business opportunities for companies in northeast England," Zhou said.

cecily.liu@chinadaily.com.cn

(China Daily Africa Weekly 10/03/2014 page13)