‘Paradise Silicon Valley’ could be full of eastern promise for UK

Yorkshire businesses will find “endless and strong” opportunities in Hangzhou, a twin city of Leeds that aims to become the “Paradise Silicon Valley” of China, said an expert at Leeds Business School.

Hangzhou, linked with Leeds since 1988, is the capital of Zhejiang, a province in the Yangtze River Delta renowned as the centre of private enterprise development in China.

The city’s IT sector is expanding at a phenomenal rate and last year grew by 36 per cent, reflecting national efforts to transform the economy from one based on cheap manufacturing to hi-tech innovation.

The ambition is part of China’s latest five-year plan, approved by National Congress earlier this year.

Professor John Shutt, an expert in regional economic development, said: “The plan will create many new opportunities of interest to Yorkshire businesses.

“China’s priority is to accelerate economic restructuring and its priority is to increase research and development.

“The aim is to turn the coastal regions like Zheijang away from being world factory hubs towards being global knowledge hubs of research and development, high-end manufacturing and leading financial and business services.

“The policy is both to upgrade existing industries, develop national champions and remain open to foreign inward investment.”

So-called strategic emerging industries will receive nearly £400bn in state investment over the next five years. They are biotechnology, new energy industries, energy conservation and environmental protection, hi-tech equipment manufacturing, clean energy vehicles, new materials and next- generation IT.

Prof Shutt has carried out extensive research into the city region as part of his work on regional economic development in China.

He said Hangzhou has developed a strong culture of “industry technology alliance” between educational institutions and businesses.

The city has designated technological development zones and is home to successful firms such as Alibaba.com, the online trading platform founded by Jack Ma which employs 30,000 people.

Hangzhou has a population of 3.2m people, including a large pool of highly skilled workers and engineers, said Prof Shutt. Many of these have graduated from the city’s universities, which are renowned for their technological departments.

There are opportunities beyond the hi-tech sector. Other key industries include food processing, logistics, light machinery and automotive components.

“The opportunities are endless and strong,” said Prof Shutt. “The manufacturing and service sectors are extremely dynamic.”

UK Trade & Investment, the Government body, points to the city’s large service sector, attracting many international offices and branches.

Foreign investors include Canon, Mitsubishi, Agfa, Pfizer, HSBC, KPMG, Burberry and Tesco. Another pull has been the city’s strategic location at the junction of major railway lines and motorways.

The city’s government is investing in public transport and actively encouraging private investment in education and social training and investing in infrastructure.

It is also promoting its environmental industries, ranging from energy to waste management, and has an important ecological interest through the nearby Xixi wetland national park.

The city is regarded as a cultural and tourist centre and, according to Prof Shutt, the West Lake area “is as familiar an image in China as the Great Wall and Forbidden City”.

Every year, West Lake hosts a festival, which provides good networking opportunities for small businesses. Alibaba.com also organises an annual festival called Alifest, for small businesses and entrepreneurs interested in helping to build China’s IT industries.

Prof Shutt said: “They are very open to inward investment and they are very keen to build relationships with their city partners. They see Leeds as a key partner. You would be received very well.”

But he added: “Leeds is one partner. Hangzhou is twinned with 200 cities. That can be a shock to the system for the UK, which doesn’t quite realise how open and how competitive China is these days.”

In a research paper, Prof Shutt said the challenges that face Hangzhou are those that face China, but they also present opportunities. One of the main challenges concerns growing talent shortages, which many Chinese executives cite as a barrier to expansion.

He said Yorkshire universities should develop closer links with Chinese counterparts.

CASE STUDY 1

A trip to China to solve a problem for a client opened up huge opportunities for graphic design agency Worthington Brown.

Four years ago the company, which is based in Holmfirth, West Yorkshire, was working on a contract to design packaging for JCB power tools.

It sent its artwork to the manufacturer in China but the colours on the packaging that came back were wrong.

Worthington Brown decided to embark on a field trip to work out what the problem was.

Creative director Mike Connan said: “They had state-of-the-art technology but the technical operators were not as experienced as the guys in the UK.”

Worthington Brown, which has a turnover of £1.2m and employs seven staff in the UK, decided it needed a member of staff on the ground in China to carry out quality control.

The company, which was founded in 1990, is now based in a purpose-built studio in Hangzhou – about 200 miles south of Shanghai – where it currently employs four staff.

It works with Chinese companies to help them appeal to the Western market as well as working with ex-pats from the UK, Europe and the US. Its clients include Radisson Hotels, Hilton and Holiday Inn.

Founding managing director Neil Worthington said: “The Chinese don’t believe that packaging sells anything.

“We spent the first two years out there trying to convince them otherwise.”

Over the next five years Worthington Brown plans to set up more offices in China.

“We are based in a second- tier city. We would have big competition in Shanghai but we have less competition here in Hangzhou,” said Mr Worthington.

CASE STUDY 2

The need to turn a design idea into a product within a short space of time led TC Bathrooms to move its manufacturing base to China.

The Dewsbury-based firm, which was founded in 2000, realised that its sites in the UK and Italy couldn’t perform as quickly as it needed them to, so eight years ago it moved production to China.

Managing director Martin Chalcraft said: “We were a retailer and we went into trade distribution and built a brand in 2002/3. It was known for being cutting-edge with its design but it became evident that we weren’t able to design, make and launch products within an acceptable time.”

He added: “We have been fortunate to find the right people to work with in China. Our chairman has spent an awful lot of time there and he has to work extremely hard at maintaining our relationships.

“We attended exhibitions over there and found the right partners to work with. The product has to be how we want to see it for the UK market in terms of design, quality and the way it is presented to the end customer.”

Mr Chalcraft said the company’s links with China had helped it to grow its turnover to £26m from less than £10m eight years ago. It employs 205 staff in the UK and two people in China who maintain quality control across the 12 factories it works with.

Mr Chalcraft added: “The key is to find some Chinese nationals who are educated in an English way and who can support you in the early days. Our chairman will travel around on his own now but in the early days he had a chaperone.

“You need to get out and see and feel the culture and the way they do business over there. You can’t do that over the phone.”