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China: Investment into the United Kingdom

Volume 753: debated on Wednesday 7 May 2014

Question for Short Debate

Asked by

To ask Her Majesty’s Government what assessment they have made of the recommendations of the report of the All-Party Parliamentary Group on East Asian Business on foreign investment from China into the United Kingdom.

My Lords, I am most grateful to have been granted time for us to debate what I believe is a crucial inflection point both in the UK’s relationship with China and in China’s own outward investment story. I declare an interest as the chair of the All-Party Parliamentary Group for East Asian Business and as a director for the Manchester-China Forum. I also declare a number of other relevant personal and public roles and interests which are outlined in the Lords register.

In particular, I would like to highlight through this debate the recent publication of a report commissioned by the All-Party Parliamentary Group for East Asian Business and conducted independently by Roland Berger entitled the Independent Review of Chinese Foreign Direct Investment. I hope that this report will help inform and stimulate this debate, and the debate that we as a society and country need to have as Chinese firms over the coming years dramatically increase their investments internationally, and in the process become a more important feature of economies such as ours.

In many ways there has always been investment and trade from and with China and the Chinese into the UK, whether in financial or non-financial ways, with waves of Chinese immigrants over the years putting in their time, energy and capital to help build and rebuild this country in the run-up to and after the two world wars. Think of the catering industry and the supply chains that feed it, and then think about the recent manufacturing story as UK firms worked with Chinese partners to lower their costs and globalise their supply chains. And then think about more recently as newly affluent and increasingly aspirational Chinese people have come to the UK to invest in a variety of financial assets, from property to stocks and bonds, arts and antiques, and luxury items.

During this period and in particular with the liberalisation of trade within China and encouragement of state and private enterprises to invest abroad, outbound FDI has accelerated, creating a huge opportunity for countries such as ours. The APPG report highlighted a number of scenarios, from today’s relatively low investment base to seeing the UK capturing between 3% and 5% percent of China’s future annual global outbound foreign direct investment, which alone would create between 48,000 and 75,000 direct jobs by 2020 in a median and optimistic scenario. The drivers of such investment include a competitive tax regime, the City of London as a future hub for offshore renminbi trading, high educational quality at different stages, our world-class industry sectors, and our openness as a country to FDI in areas as diverse as manufacturing, infrastructure and finance.

The Government in particular have done a significant amount to enhance Britain’s attractiveness to such investment. The most visible expression of this includes the various ministerial visits last year, as well as changes to the visa process to make it easier for tourists and business leaders to come, shop and do business here. Behind the scenes I know that much good work is carried out by UKTI, the China-Britain Business Council, and regionally to encourage Chinese people to visit and invest on both the large and the small scale. This has produced fruit with recent announcements such as the Royal Docks development by ABP, the investment into Manchester’s Airport City being spearheaded by Beijing Construction Engineering Group, and the significant investment in R&D and higher education by telecoms firms such as Huawei, a supporter of the APPG. In addition, we have in recent years witnessed major welcome investments into nuclear power, water utilities, engineering firms and even breakfast cereals. More such investments are in the pipeline, evidenced by recent positive visits to the UK by organisations such as the China Entrepreneur Club, whose member businesses represent a significant proportion of private enterprise turnover in China. Indeed, the chair of McKinsey & Company Asia recently wrote that 2014 could be the biggest year for Chinese foreign direct investment into the UK, and the APPG report highlights the continuing strong upward trend we are likely to see in the wake of these first major investments.

Now is a crucial time when major global Chinese firms are deciding where to locate their headquarters as they start to look beyond the borders of Greater China, and the UK can undoubtedly benefit from this influx so long as we remain an attractive place to invest and do business in. However, we must remember that the benchmark should not be how much such investment is growing in absolute terms, but how we are doing in capturing a share of this investment globally as compared to our competitor nations in Europe and around the world.

While we have a lot to be thankful for and to congratulate ourselves on as a country, the APPG report highlights a number of areas where we could do even better, not just to continue to boost our share of Chinese global FDI, but to ensure that there is balance and diversity in the investment from China geographically, by sector and, indeed, by size. The report highlights that as Chinese firms decide where to locate their headquarters, more could be done to address the issue of hiring talent. It is all very well to enable the chairperson to locate to the UK, but headquarters need to have top teams, and if you are relocating part of your top management from China to help establish operations here in Europe, you will want to do so in countries that make that possible. Currently, there are difficulties for firms looking to bring in experienced Mandarin speakers versed in their own corporate culture. Other countries in Europe and elsewhere often even help to negotiate visas for top management at the point when the decision about which country to locate to is being made.

We need to operate on a level playing field globally with other nations, particularly Germany and others in Europe who have the added advantage of being in the Schengen zone. The need for business management visas, which could be addressed if we redesigned our system more around the skills we need as a country, ought to be addressed alongside the issue of the removal of post-study work visas. In my view, the system ought to be relaxed for countries in the emerging world that we want to trade with more, such as China, in order to provide our local firms with Mandarin-speaking, China-savvy talent that will help them grow, as well as supporting firms which are interested in locating their headquarters here.

Another area highlighted in the report is the need for more FDI to be attracted into areas within and beyond London and for resources to help diversify agency support so that it is not carried out only centrally, but also regionally. With the recent focus of UKTI effort around strategic sectors, which fits with the report’s recommendation for greater sector expertise in our national approach to attracting foreign Chinese investment, there is a real opportunity for cities and localities to utilise their local knowledge and networks and help small and medium-sized enterprises to connect with China by receiving Chinese investment. It would be interesting to see what the Government can do to diversify and attract more funding into this area so that the north and west of the country and areas outside London, as well as poorer areas of London, can benefit from the influx of Chinese funds.

The report also contains a number of recommendations and observations that highlight the importance of the cultural and even linguistic sensitivity needed for us to continue and grow our trade links with China and to attract further Chinese investment, from bringing in Chinese language-translated tax information, just as we have brought in Chinese language visa application forms, to encouraging commissioners of public tenders to be aware of the sometimes lengthy decision processes in China for outbound investors, which can take a year or more for investments of more than $1 billion, to simply understanding China’s regular five-year plans and how they affect priorities for investment at the level of firms and sovereign wealth funds. Here there is a role for both public and private intermediaries to be supported in their efforts to help bridge the cultural and linguistic divide. Intermediaries struggle at times, particularly in making medium-sized deals happen, because the timelines for facilitating an investment and ultimately getting paid for their work can be lengthy. This is important because while billion-dollar deals benefit the economy and help us hit our quotas, small and medium-sized firms, as we know, employ more people and have the potential to create more jobs.

What is the Government’s response to the recommendations in the APPG report, and how do they intend to address the visa, regional and intermediary- support challenges that it highlights, so that we can continue to compete with countries such as Germany and others and bring the benefits that come with increased Chinese investment to more industries and to firms of different sizes and geographies?

The final point I wish to make is to emphasise the importance of relationships. For 50 or more years, we as a country have benefited greatly from our alliances with Europe and America, with whom we have shared cultural and linguistic histories. Businesses here in the UK have traded with, invested in and received investment from partners across the English-speaking world and the continent for many decades. Relationships have been key to this, as well as proximity and opportunity. With the re-emergence of China economically on the world stage, it is relationships that are going to be key, not least because, perhaps more than most places in the world, they form the bedrock of business culture. To receive productive, successful investment from China and to ensure it creates local jobs and growth for Britain and British firms requires an understanding of the Chinese mindset, its culture, its priorities and its people, and of how Chinese firms are having to learn to adapt to deal with our market, our legal system and even our media.

To this end, I want to ask my noble friend the Minister how as a country we plan to do more to engage the local Chinese British diaspora and visiting Chinese students in the UK—as well as more British students and graduates as they learn Mandarin and gain relevant experience in China—so that they can assist our efforts in both countries to facilitate, attract and make the most of increased Chinese foreign investment in the years to come. Beyond that, how can we work together to encourage our towns and cities to look east to create the right climate for Chinese FDI? Finally, I want to ask how we can get our small businesses in particular to feel more comfortable with trading and receiving investment from Chinese investors, which can then be a potential spring-board for them to expand their exports to other parts of the world, not just back to China itself.

The Chinese economy is going to remain a driver of the global economy, and over time of our economy, for many years to come. At this pivotal moment, let us do all we can to encourage relationships to be built up and capital to be invested so that British businesses, industries, and sectors can benefit from this growing and welcome trend. Let us ensure that at every level, not just here in London and in central government, everyone can play a part in helping to make this much needed investment work for the benefit of all.

My Lords, I thank the noble Lord, Lord Wei, for that wonderfully powerful lobbying from a certain perspective—but that is what an APPG chairman is supposed to do—and I think that we were all extremely interested in everything that he had to say. I certainly will not disagree with anything he said, but I want to highlight a couple of different issues. Before I start, let me also say that this is my first interaction with the Minister, and I am delighted to be on the same side as him—but perhaps slightly opposed—in this very significant debate. I look forward to hearing what he has to say.

I want to pose a couple of general questions. One of the most important issues that should affect Britain’s economic and political considerations is where to draw the line between strategic interests and commercial interests. Not everything can be up for sale, and not everything can be sold to everyone. In the Dubai Ports World controversy in the US some years ago, a state-owned enterprise attempted to buy what was deemed a strategic US asset. At issue was the significant question of who controls US ports. By the way, this was not a right-wing Republican argument—one of the champions of the opposition to Dubai Ports World taking over US ports was one Hillary Clinton—as there were people on all sides who saw ports as a strategic asset and therefore vetoed the attempt by Dubai Ports World to take control. Ownership was not a significant issue, as P&O had ownership of the ports at that time, but ownership by a strategic ally is very different, in terms of public perceptions of security, from ownership by a non-transparent state-owned enterprise. The issue was ownership by a foreign power about which there were perhaps reservations, either about the state itself or about the record of the entity that was attempting to do the transaction.

Likewise, on the issue of Pfizer and AstraZeneca, we in the UK need to think long and hard about strategic assets and whether research and development, including scientific research, comes into the category of meeting the public interest test. I would argue that it does, not just because of the jobs and R&D spin-offs but because, where a primary purchaser is in a dominant position in relation to the state sector—that is, in the NHS—we need to ask whether we give disproportionate pricing power to a player in foreign ownership that would be in charge of that kind of strategic asset. I would say no.

Going back to the China debate, but keeping on that theme, one need only look at the ire or public sentiment that was aroused when another strategic industry—I shall use the example of UK water utilities—was privatised. The water companies were taken over by a state-owned enterprise, which in this case meant France’s EDF, and the profits reverted to the French taxpayer. There was considerable speculation about why, in an era of austerity, British schools could not be built but the French Government had sufficient in its coffers to do quite well with its public sector.

I have not mentioned any Chinese company as an example. However, the APPG report highlights that analysis of the growth in Chinese investment, which has increased by a factor of 13 since 2008, shows that much of the growth is due to a small number of M&A deals, which are dominated, it points out, by state-owned enterprises and sovereign wealth funds. So it is only a matter of time before we are caught in a controversy where a Chinese firm or a state-owned enterprise is involved, and hence the need for the Government to think through the broader principles in this area, particularly the security dimension. Needless to say, the manner in which an industry is run is critical to public acceptance. Where it is well run and the UK benefits from investment, there is usually little disquiet. However, when it comes to an issue where “rent seeking” is too blatant—which I think was the case in the water utilities—at a cost to the consumer, in my view there is cause for legitimate complaint.

A further strategic concern has to be around technology transfer. Only yesterday, noble Lords who take the Financial Times will have seen a report on security service chiefs expressing their concern about cybersecurity in the context of junior staff at IT companies being lured into positions through remuneration where they might be able to divulge vulnerabilities in IT systems to competitors. I should say that the description of a “competitor” in terms of cyberespionage is not usually the bread-and-butter business of the level playing field where there is healthy, market-led competition, but rather the ability of foreign powers to bring down assets in other countries. Estonia experienced that from Russia, the US from the Chinese, among others—that is well documented and recorded—and of course Iran from Israel and, vice versa, Israel from the Arab countries; that is just to name a few of the well known cases. The more overt commercial attacks, which can cause the economy much more harm, are often unreported for reasons of commercial confidentiality, although they have higher costs for the economy and the companies themselves. I wonder if, in answering this debate, the Minister will reflect on the question of how and to what extent we define strategic industries, particularly when the investor has low levels of transparency, there is no public accountability and our own leverage is potentially extremely limited due to the size of our economy in relation to that of the investor.

Another factor I want to touch on is not mentioned in the APPG’s report, but it touches on global trade and competition. I refer to the EU-China trade talks that have been embraced by the UK Government and for which they have become the cheerleader in the EU. I would not wish for a moment to appear to be opposed to the talks, and I am not, but I hope that we learn the lesson from the current crisis in the EU over Russian energy supplies to several EU states. It is serving to downgrade EU states’ resilience in security terms and some countries are virtually being held hostage by certain Russian companies in terms of pricing and the delivery of energy.

The lesson here is twofold. An overreliance by strategic sectors on one supplier gives the foreign owner too much power which it may exploit. Trade dependency is similar, and one must not get hooked on any one market. So, while we welcome investment from China and our investment in China, it is terribly important that we keep our eye on diversified markets and diversified investments. It may be exciting—in the case of China we are talking about a low base at this point; I accept that completely—and there is much to play for, but we need to keep an eye on the end game, which is that overreliance on either side may not be very healthy.

The second point is my final one, and it is about multilateralism. Over the entire post-war period, Britain has championed a multilateral, global, rules-based order, whether that was the establishment of the United Nations or the Bretton Woods system, the UNCTAD or the WTO. I am therefore sorry to see us taking a narrow focus on EU-China talks rather than EU-East Asian trade talks that would include the other powerful emerging economies in south Asia. That is what the APPG is about. My fear is that when large powers are allowed to break off from multilateralism into bilateralism, geopolitics comes into the frame and power is disproportionately distributed, thus disadvantaging weaker economies. I am really sorry that the APPG on East Asian business has not sought to battle for those other countries as well in this regard, but I am sure that it will do so in other reports. Indeed, I can see that the noble Lord, Lord Wei, is nodding his head, so I look forward to those debates.

In conclusion, I agree with all the conclusions that the report laid out, and I hope that the Minister will be able to take its recommendations on board, despite the omissions. On the emphasis of the noble Lord, Lord Wei, on having ambassadors within the UK, I should declare a very small interest. I happen to be chancellor of the University of Northampton and am delighted to report that, as of last year, the president of the Northampton students union has been the first Chinese national ever to be president of a students union in the United Kingdom. So we are an outward-looking university, just as we are a country.

I am very pleased to follow my noble friend Lady Falkner, and I am pleased that she made some points about AstraZeneca, a very current issue and something that we should be majorly concerned about, separately from this debate today. However, it is welcome that the UK is the most popular destination for Chinese investment in the EU. This is good, and it represents an improvement over the past few years.

The recent All-Party Parliamentary Group on East Asian Business review of foreign direct investment into the UK is very welcome, informative and helpful in pointing to areas where we are being proactive in the UK, and where we could do more. I congratulate the noble Lord, Lord Wei, very much indeed on his leadership on this, which is really why I am here today. I am not here to say too many more words, because the report is so comprehensive, but just to give my support to the report and say, “job well done”. I hope that the Government pick up on the points that have been made.

The report is comprehensive and has drawn attention to all concerned about the issues involved. One issue that was alluded to by the noble Lord, Lord Wei, on which I have campaigned for quite a long time, is that this country needs to enable those from China who want to come here to do so. In the past, there have been great stumbling blocks on the issue of visas. There have been enormous and unnecessary problems when people from China have come here for investment purposes but also as tourists. At the end of the day, we want tourists to come here to produce a good return for our economy, but also to introduce people from China to the fact that this country is what it is and is an area in which they can invest if they learn more about us. On an issue that I and a number of my colleagues have raised on a number of occasions, we have had assurances recently from the Government that these concerns are being taken on board. I hope that that is the case; I know that many from the Chinese community continue to monitor it.

We have an issue that came up about visas, with people applying from China finding that the documents that they need to fill out have not been in Mandarin. That is something that we have to address, when it comes to people who want to invest in this country, to ensure that the pieces of paper that they need to consider have been translated into Mandarin.

The point was also made that the regions of the UK should be proactive in helping inward investment, as well as the UK Government. The specific recommendation was made that each UK region should have at least one bilingual adviser in place. We as a country are not particularly as good at languages as some other countries are. I own up to this myself. Some of my colleagues have four or five languages but I struggle with one or two when I am a tourist—but beyond that, I have none at all. It is therefore important to encourage investment from China throughout the regions and ensure that regional advisers are bilingual.

There are many recommendations in this report and I hope that the Minister can confirm that it is being examined in detail, given that there is much to be gained by increasing investment to help growth in this country. I could go on endlessly but look forward to the Minister’s response because there is so much that we can gain. Perhaps I may quote from the report, which states:

“Compared to the country’s overall track record in attracting foreign investment, the UK’s performance lags with respect to China. Much of this potential gap is attributable to failures to recognise and adjust to the unique circumstances of Chinese investors. Faced with a lengthy and cumbersome approval process at home, and a relative lack of deal making experience abroad, Chinese investors take longer to agree to deals, are highly sensitive to price and perceived risks, and require additional levels of professional support throughout the process”.

I again thank the noble Lord, Lord Wei, for instituting this debate, and the Minister for being here. There is an awful lot to be gained by considering this report and the many recommendations within it.

From this side, we certainly welcome this debate. As the noble Lord, Lord Wei, observed, this issue is important for the future of the UK economy. The APPG is to be commended for producing this useful report, but the question is what Her Majesty’s Government will do about its recommendations—a matter that the noble Lord put pointedly to the Minister. The answer is not unimportant.

The report commends a strategic approach but any strategy requires sound content, otherwise it becomes mere public relations. There is much good work in the report but in this intervention I will focus on where more effort is required. That should not be taken in any way as a criticism of this report.

Let me begin with some general observations on the UK’s approach to date. Having, for example, the Prime Minister take an assortment of business people to China is no doubt well intentioned but it is hardly a strategy. If it is ill thought out, with no clear plan of what is to be achieved, it can easily create a wrong impression—an impression that perhaps our Prime Minister is being somewhat transactional. That is not a good outcome.

Furthermore, warm words of welcome to Chinese investors that are matched by an obstructive visa regime can be very unhelpful. The noble Lord, Lord Cotter, has given an example of that. Let me give another one. Last autumn, a Chinese ministerial party—I repeat, a ministerial party—seeking to visit the UK was held up in Beijing. Their flight slipped by while they were waiting for their visas to be produced by the UK Border Agency. If ministerial parties are treated in that way, it is hardly the right message to be sending to investors from China. I immediately accept that there have been some improvements on the past, but compared with France we lag way behind. If anything, there seems to be an unwillingness to match welcoming words with action. This does not go unnoticed by Chinese investors.

Having the UK welcome Chinese infrastructure investment is all very commendable, but unless there is effective follow up, initiatives may run into the sand. If due diligence on prospective investors is not carried out, one runs the risk of embarrassing failures, and there is no point rolling out a red carpet to Chinese investors if we ignore our domestic requirements, such as planning, consultation with potentially affected communities and due process, that can subsequently produce obstacles and upset the project. That can risk creating an impression of insincerity on the UK side. A focus on outcomes is essential to build good relationships. An intelligent focus is even better.

Turning to the report’s recommendations, I offer one caveat. It suggests we should,

“encourage the creation of more NGO trade promotion bodies”.

I respectfully suggest that this should be treated with caution. One criticism that has been voiced on a number of occasions by Chinese interlocutors is that there are already too many UK bodies speaking with too many different agendas in seeking a relationship with China. Focus on clear messages may be a better way forward. That may not require more trade promotion bodies for China, just greater clarity.

The report importantly refers to financial services. It identifies progress by London as an offshore renminbi centre. Renminbi settlement and clearing house developments are clearly positive, although they have not gone the full way as yet. More effort is plainly required. Singapore recently surpassed London in renminbi business. Paris, Frankfurt and Luxembourg all have ambitions to be renminbi centres. Her Majesty’s Government should take the initiative now. They should consider a currency swap—a real one, this time, not simply an emergency backstop—that creates liquidity on the market now. Another initiative might be purchasing renminbi for UK reserves. Her Majesty’s Treasury could do that, and it would be a step forward. The Bank of England says that it is not for it to decide this issue and that it is for the Treasury to decide. If the Treasury wants to make imaginative steps forward in our relationship with China, adding renminbi to the UK reserves would be a very substantial step. I commend that to the Minister, at least for consideration, although possibly it does not fall within his responsibilities. Many good speeches have been made on the theme of London as an offshore renminbi centre and some real progress has been made, but London has to regain its momentum to improve renminbi liquidity in the London market to make London in reality the—not a—major offshore renminbi centre.

The report refers to sector strategies, which is very welcome as it appears to be recognising a need for industrial policy, but there needs to be a certain coherence in it. Chinese equity purchase and M&A in the UK have been referred to. They have been welcomed in the UK. The noble Baroness, Lady Falkner, referred to this as an area where problems might arise, but plainly there is a tremendous opportunity for UK and Chinese business to go into partnership in these areas. However, as the noble Baroness pointed out, we must be astute to the possibility of Pfizer-type issues arising. Ed Miliband and, indeed, the noble Lord, Lord Heseltine, have made useful contributions to this issue and it appears that the Government have been listening to some extent, after something of a false start on this issue. As the noble Baroness pointed out, not every sale of a UK company to an overseas acquirer will be in the UK’s best interests.

The report correctly recognises the importance of sectors in manufacturing and services, and HMG can have a role in dealing with this. The needless damage of putting the UK’s EU membership into play may not be wise. Placing a question mark over the UK’s success in the automotive sector, based, as it is, in the UK as a platform for the EU market, is not constructive. The Minister will no doubt appreciate that the current Government continually making noises about splitting away from the EU is not an attractive invitation for Chinese direct investment in the UK to Chinese automotive manufacturers and others.

China is serious about outgoing investment, and we need to match its seriousness of intent. There are limits to government action, of course, but relations with China are an area par excellence where Her Majesty’s Government should be able to make a real contribution. This is vouched by the success of government efforts by Germany, Sweden, France and others in engaging with China, both politically and economically.

Everyone by now says relationships are key in China. The noble Lord, Lord Wei, directly recognises this. A rapid turnover of Ministers with the China portfolio is not a help—unless, of course, the Minister is not up to the job. However, there is also an issue in relation to civil servants. The approach to rotation of officials can be counterproductive: the despatch of personnel without sophisticated language skills to China can be less than ideal and the removal of real experts for personnel policy reasons is actively damaging.

There is a need for Ministers and officials, as well as businesses, to understand the very different Chinese culture. There is a need to build expertise on what may now be the world’s largest economy. Only knowledge and understanding of China will build a fruitful relationship. If the UK does not get serious, we will be an also-ran in what the Prime Minister calls the “global race”. However, if we work at building the relationship, the UK can indeed be, as the report aims for it to be, the favourite place for China to invest.

My Lords, I am pleased that we still have some of the Scottish contingent in for the debate. I start by thanking my noble friend Lord Wei for initiating this important debate and for the report from the All-Party Parliamentary Group for East Asian Business. China’s rise is indeed an opportunity, not just for the UK but for China, and I very much believe that this will be the decade of the Asian multinational. Our two Premiers described our two countries as “partners for growth” and we have seen notable progress in Chinese investment into the UK.

The noble and learned Lord, Lord Davidson of Glen Cova, raised a number of questions about the UK’s performance in relation to trade with China. I regret that some of the statements are perhaps a little out of date: our performance has certainly been weak historically but we are now making significant progress. Initial results for 2013-14 show a substantial increase in the level of inward investment from China. As my noble friend Lord Wei said, this is across a number of sectors, from property investment to infrastructure, manufacturing and nuclear, to name but a few. Announcements in press releases indicate commitments of upwards of £8 billion—a very substantial increase on past experience.

This growth reflects the efforts not only of the Government but of many groups and individuals including the APPG. It also reflects the success of government policy in making the UK an attractive place for businesses to establish themselves, to invest and to grow. However, I fully accept that there is clearly still much to do. The report highlights a number of areas, and I would like to address some of the particular points made in it.

The report recommended that we should provide additional regional support for inward Chinese investment. I should stress that the policy we operate, which I think has operated for some time, is based on the UK-first principle, where we try to attract inward investment to the UK and then spend time with the potential investor showing them regions that may be suitable for that type of investment. That said, we are doubling the number of partnership managers to work alongside local enterprise partnerships and enterprise zones to assist them in attracting inward investment. UKTI will continue to work with bodies to improve the local proposition, based around a region’s particular capabilities. We welcome, for instance, initiatives such as the Manchester-China Forum, championed by my noble friend Lord Wei, to promote regional co-operation and relationships.

UKTI does not typically recruit advisers with specific language skills but those with sector skills. However, we have in place sector specialists who are bilingual. In addition, we use the resources of UKTI in individual countries and have a large number of advisers in China as well as, of course, the FCO network. They assist with inward investment opportunities and marketing.

The report also recommends that the Government work together with NGOs to encourage inward investment and market the UK. I take the point that there are a number of these NGOs but the Government certainly work with a wide range of organisations, such as the China-Britain Business Council, the CEC—which was mentioned earlier—the 48 Group Club, UK-China CEO Dialogue and, of course, the APPG. I also recognise and welcome the point made about the diaspora community. As a Government, and as part of our trade effort, we should be seeking to use diaspora communities far more widely, in relation to trade not just with China but with a number of other countries.

Noble Lords, including my noble friend Lord Cotter, also raised issues of immigration policy. I have heard many of the same concerns directly. Although there are definitely issues, some of it is also perception. I will set out a few facts. First, the UK has more visa application centres in China than in any other country and 96% of Chinese visa applications are approved. The UK issued a third more visas to Chinese citizens in 2013 than we did in 2012, so we are making progress. There was a 9% increase in the number of study-related visas.

I wonder whether the Minister could focus not so much on the numbers of visas, but on the problems that the visa process creates: delay and complexity. That is what sends the message that you, the Chinese investor, are not welcome.

My very next words were going to be that the average time to process a visa is seven working days. Of course, there will be more difficult cases, but we also have a three-day to five-day priority service available. The Prime Minister, during his well thought through trip to China, announced that we would be trialling a 24-hour service this year. That received a standing ovation in the room he was in.

The Minister did say that I was out of date, but possibly he did not necessarily mean that in relation to visas. Only last week I had a party of Chinese investors saying that they were having considerable problems with delays in getting visas. These are people who wish to invest in the United Kingdom but are experiencing delays. Perhaps the information that the Minister is obtaining is out of date.

I am sure that if the noble Lord would provide me with some details of that particular party, we can look into what their challenges were. We are trying hard to make the process of applying for a UK visa easier. We have a pilot scheme allowing selected travel agents to make offline applications for tour groups using the same forms that are used for Schengen—with a small additional form—so that people do not have to enter the same information twice. We also have a select business scheme to provide key businesses wanting to invest in the UK with special services. There are currently around 140 members. The Home Secretary has announced the launch of the GREAT Club, an invitation-only account management service for the very highest-level investors.

I recognise that there are issues in relation to graduates. All graduates have a four-month period in which to apply for a graduate-level job, which allows skilled, well paid graduates to stay in the UK. I accept that the situation is not perfect. Significantly, we talk with the Home Office about how we can improve perception and what we can do around both policy and process. However, the situation has improved significantly. From talking to Chinese businessmen, which I do regularly, I know that they recognise some of that improvement. However, there is still more work to do.

I now turn to taxation. A competitive and clear tax regime has a role to play in attracting inward investment and is seen as a UK strength. I know the policy recommendation was that HMRC should translate its guidance into Mandarin, but it is not HMRC’s policy to translate tax returns into foreign languages, partly due to costs but also for reasons of equality of treatment. Having been a tax accountant in the long-distant past, I can confirm that nuances of languages can be very difficult at times, although there is of course an opportunity for professional services to advise on these issues. I will pass the comments regarding foreign languages on to HMRC, but it is not an issue that I have had raised directly by inward investors.

I welcome the comments from noble Lords on the importance of setting up as an offshore RMB centre. Over the past few years, we have made a lot of progress in changing some of the regulations and policy and in giving encouragement. We can debate whether London is a leading offshore RMB centre, but many would say it is the leading centre. We have certainly seen progress, but we know that there is more to do and we will be looking for further—

The Minister indicated I was out of date. He was perhaps not referring to the surpassing of London by Singapore as an RMB trading centre, which was noted at the end of February. Perhaps he would care to comment on that.

In currency trading, there are different time zones. I was a spot trader once upon a time in my life and used to take over from Singapore. We shall see how the figures on RMB trading come out for the full year. The UK has established a very strong presence in RMB, which is as a result of the Government’s policies and the changes they have made.

UKTI has created a number of sector organisations focusing on increased investment in areas such as automotive, life sciences, financial services, offshore wind, regeneration and innovation. They will help individual sectors and investment, not just from China but from other countries. They are not aimed just at China, but we think these sectors are important to show expertise in individual areas. In addition, we have a specialised group aimed at regeneration opportunities: RIO. This has been particularly attractive to Chinese investors and provides a pan-UK list of opportunities for regeneration in every region around the UK. RIO not only presents a playbook of opportunities but will guide potential investors through some of the barriers rightly raised by the noble and learned Lord, Lord Davidson.

This Government has a strong focus on building relationships with China. There have been numerous trade and ministerial visits, which are well thought out and well appreciated by the Chinese hosts. The highlight was the Prime Minister’s visit with the biggest business delegation ever assembled. More than half the companies that went on that were small companies. One of the important agreements signed during that visit was with the National Development and Reform Commission, to enhance trade and investment between the UK and China. As a result, and with the support of the British embassy in Beijing, the NDRC has launched the Chinese Enterprises Investment Guide to the UK, which is the first guide that it has published written for Chinese companies looking to invest in another country.

I shall pick up some points raised by the noble Baroness, Lady Falkner. The UK is proud of its position as an open economy, which we think has benefited the UK. It has created millions of jobs. When we talk about overseas investment, we have to look at JLR as an example of an acquisition that has helped the UK immensely and created value added and jobs. It is far less about the nationality of the company involved than its quality. We have public interest tests, particularly related to security, a key area which the noble Baroness raised, and areas such as media plurality. It is important that we look at the context of how much we have benefited. The UK will continue to position itself as open and to consider some of the challenges. I remind noble Lords that when we talk about AstraZeneca, Astra was a Swedish company; when we talk about GlaxoSmithKline, Smith, Kline & Co. was from Philadelphia. When we talk about openness, we have to remember that it is a two-way street.

The noble Baroness referred to diversifying into China too much. The challenge we have today is that we are not diversified enough. The EU has 45% of our trade and the US is our largest single market. It is this Government’s aim that the fast-growing markets should represent a larger proportion of our trade. The EU-China trade talks are just one of many trade talks. There are trade agreements being made and discussions going on with Japan, India, Singapore and the USA. We have recently concluded talks at the political level with Canada and we are discussing EPAs with many countries around the world. There is of course the Bali WTO agreement. This country is championing free trade around the world and will continue to do that on a plurilateral and multilateral basis, as well as on a WTO basis.

In conclusion, the UK has been very successful at attracting inward investment—we must remember that we are the number one in Europe for inward investment. It is the aim of this Government to improve our position in gaining inward investment from high-growth economies where historically we have not been successful, and of course China is number one in that list. We made significant progress in 2013 with multibillion pound investment across a range of sectors. We agree with the report that there is more to do, and we will do more. I thank all noble Lords who have spoken today for attending and for their interest in this subject. We have considered the report in detail and will continue to look at its recommendations. We will continue to engage strongly with government and non-government organisations in the UK and in China to make further progress and to make the UK the most attractive and successful investment destination for China in Europe.