How to work with China
David Percival MBE has spent more than a decade at the leading edge of the UK’s trade relationship with China. From head of UK Trade & Investment in China during the 2010s to his current role as Managing Director of Deloitte China, he has seen all its twists and turns. As chairman of Manchester China Forum since 2017 he has also been a strong advocate for Chinese investment in the North West. Today, as the relationship faces some of its greatest challenges he believes the case for engagement is as strong as ever.
David Percival MBE Chairman, Manchester China Forum
Updated 22-07-2022
How to work with China
David Percival MBE has spent more than a decade at the leading edge of the UK’s trade relationship with China. From head of UK Trade & Investment in China during the giddy days of the so-called “golden era” of the mid 2010s to his current role as Managing Director of Deloitte China, he has seen all its twists and turns. As chairman of Manchester China Forum since 2017, he has also been a strong advocate for Chinese investment in the North West. Today, as the relationship faces some of its greatest challenges he believes the case for engagement between China and Manchester is as strong as ever.
When there are fundamental business opportunities, as there are in Manchester; in advanced manufacturing, financial services, life sciences, and now increasingly the low carbon economy, then everything else; the research and innovation and the skilled workforce, comes together.
David Percival Chairman, Manchester China Forum
Updated 22-07-2022
What's behind the success of Manchester’s relationship with China? There are a few points to think about. The most important is it’s a long-term relationship. It’s been 35 years in the making but accelerated massively after 2015. Until then nearly 95% of investment was going into London and very specifically into central London. That changed after Xi Jinping’s visit when investment into Manchester accelerated. This basically told Chinese investors to start looking outside London and once they got to Manchester it was a big surprise; it’s a very China-friendly city, it’s a big economy, both the city and the region, and it’s a big centre of innovation. Now you have all of these pockets of business, like Beijing Construction Engineering Group (BCEG), which invested millions of pounds in Manchester Airport City, building new apartments and creating new jobs in the North West. Another result has been the education links, which are now incredibly strong, particularly with Manchester University. This long-term connectivity and the constant movement of people between Manchester and China has made a huge difference. Certainly the relationship has changed. Today, it is way more intertwined and more complex than the media headlines suggest. Of course, there will always be these episodes where we don’t agree but it’s been like that since I started as a diplomat in China. But we agree to figure out a way to work together. So, while the relationship is different from during the Cameron-Osborne era, the fundamentals are still there.
When there are fundamental business opportunities, as there are in Manchester; in advanced manufacturing, financial services, life sciences, and now increasingly the low carbon economy, then everything else; the research and innovation and the skilled workforce, comes together.
Has your pitch to Chinese investors changed? I would say yes, but also that most of the really big players from China are already in the UK, so the question for them is should we expand out of London and look at Manchester? The pitch then is broadly based on the business opportunity the city brings. That's vital because if the business case doesn't stack up then nothing else really matters. But when the case is strong and when there are fundamental business opportunities, as there are in Manchester; in advanced manufacturing, financial services, life sciences, and now increasingly the low carbon economy, then everything else; the research and innovation and the skilled workforce, comes together.
How has the conversation in China about Manchester changed? I think the important point is that there is a conversation now. That’s really what the last six or seven years have been about; about having conversations about Manchester. That’s simplifying things a bit, but when I was talking to investors 10 years ago it was London or nowhere. Now it's a much more considered discussion. When the Forum started, I was very keen that we should move away from the football story. Obviously, it’s a great story and it’s something that people in China are aware of, but from a business point of view there’s a lot more going on that we should be showcasing. Funnily enough, I was talking to the chairman of the China Chamber of Commerce who was in Manchester recently with a group of senior bankers and investors from London. They've been following the Chinese Government’s Covid guidelines, so they haven't travelled anywhere in the UK for months and I think they were incredibly surprised by the vibrancy of the city. And bear in mind, they only live in London. So, clearly, there’s still work to be done. We need to get more of those positive messages across, particularly where they can help with things like the levelling up agenda.
The economist, Jim O'Neill, who famously coined the ‘BRIC’ acronym, recently said that for the first time in 30 years he is less sure about the trajectory of the Chinese economy. Is he right to be concerned? I don’t think that's surprising given the way the Chinese economy is evolving and its movement towards a service economy. I'm not sure what the stats are but manufacturing costs in China have certainly been going up for a while. Plus, China’s Belt and Road Initiative is all about tapping new markets and finding new manufacturing centres. So, I think the move to a service economy will require them to look at manufacturing elsewhere; Southeast Asia, the Middle East and Africa. But I agree with Jim, particularly with the impact that Covid is having but now also with the conflict in Ukraine because all of these will impact the world economy and they will impact China.
How can the UK be an R&D partner with China, especially developing green technology? I've always been a champion of R&D in the UK but we need to get the message right. A company like Huawei has something like 40,000 PhD students across China doing R&D at a scale we cannot even conceive of. For companies like this the fundamentals will always be done in China. However, I absolutely do see a massive partnership opportunity for the UK and for Manchester in forming collaborations to take on contracted research. We can say, “Tell us what your issues are, and let us solve them.” Like it or not, there’s no avoiding the fact that companies such as Huawei continue to be an important source of funding for research at many UK universities, and at Manchester more than most.
Are people right to be nervous about collaborations between the UK and China, particularly when it comes to technology? There’s certainly been a cooling of the relationship but for the most part the risks haven't changed. The main one will always be IP protection but the UK has done a good job of lobbying the Chinese government. UK companies in China now have much better legal protection. And bear in mind, your Chinese partner will now also have skin in the game; your IP protection is in their interests. So, while there are still risks, they are managed a lot better than they used to be. I think the other point about business in China is it’s ferociously competitive, whatever your sector. I get this all the time from British companies that assume they're going to land in China and be world beaters. But everyone has to figure out why they’re in China, where they fit and how to compete.
Does that suggest a naivete about China? Yes. I think so. I'm also a founding director of UKNCC (UK National Committee on China) and developing greater knowledge about China is the driving force behind setting that up. Building understanding of the Chinese government, how Chinese industry works, and how Chinese people work is so important – and for them to understand the UK, too. I think that’s probably where Manchester has done well. The education relationship, especially, has allowed that sort of crossover understanding to evolve. But generally speaking, the UK has a very poor understanding of China beyond the headlines. You need people who are prepared to make a career choice to really focus on China, and we need to do better to encourage that, particularly given the importance of China to most businesses and to government, and the lack of knowledge there is at the top.
What has Manchester China Forum contributed to Manchester’s proposition? I get asked this a lot because without doubt Manchester is perceived as the best-in-class city in terms of its relationship with China. That’s the view across all stakeholders, in government and in business; Manchester does it best of any city apart from London, and that’s a huge tribute to MCF. Essentially, it’s been successful for two main reasons: First, it is private sector delivery. Manchester China Forum has a board of directors that helps deliver outcomes for themselves but also significant outcomes for the greater good of Manchester. That’s unusual because normally that kind of thing is done by civil servants. Second, it has a holistic approach that sees the bigger picture – education, infrastructure, investment and cultural exchange; they’re all intertwined. The point is business is not done in silos and I think it’s that connectivity that makes the difference. So, if someone asks me “why has MCF been so successful?”, I would say it’s because it builds relationships at all levels, from high-level business and government at ambassadorial level, right down to student level. MCF acts as a focus and allows things to be done at all levels.
Interview by John Millichap. Produced by Manchester China Forum and Signal8 Digital. Graphic by Signal8 Digital.
What's behind the success of Manchester’s relationship with China? There are a few points to think about. The most important is it’s a long-term relationship. It’s been 35 years in the making but accelerated massively after 2015. Until then nearly 95% of investment was going into London, and very specifically into central London. That changed after Xi Jinping’s visit when investment into Manchester accelerated. This basically told Chinese investors to start looking outside London. And once they got to Manchester it was a big surprise; it’s a very China-friendly city, it’s a big economy – both the city and the region – and it’s a big centre of innovation. Now, you have all of these pockets of business, like Beijing Construction Engineering Group (BCEG), which invested millions of pounds in Manchester Airport City, building new apartments and creating new jobs in the North West. Another result has been the education links, which are now incredibly strong, particularly with Manchester University. This long-term connectivity and the constant movement of people between Manchester and China has made a huge difference. Certainly, the relationship has changed. Today, it is way more intertwined and more complex than the media headlines suggest. Of course, there will always be these episodes where we don’t agree, but it’s been like that since I started as a diplomat in China. But we agree to figure out a way to work together. So, while the relationship is different from during the Cameron-Osborne era, the fundamentals are still there.
Has your pitch to Chinese investors changed? I would say yes, but also that most of the really big players from China are already in the UK, so the question for them is should we expand out of London and look at Manchester? The pitch then is broadly based on the business opportunity the city brings. That's vital because if the business case doesn't stack up then nothing else really matters. But when the case is strong, and when there are fundamental business opportunities, as there are in Manchester; in advanced manufacturing, financial services, life sciences, and now increasingly the low carbon economy, then everything else; the research and innovation and the skilled workforce, comes together.
How has the conversation in China about Manchester changed? I think the important point is that there is a conversation now. That’s really what the last six or seven years have been about; about having conversations about Manchester. That’s simplifying things a bit, but when I was talking to investors 10 years ago it was London or nowhere. Now it's a much more considered discussion. When the Forum started, I was very keen that we should move away from the football story. Obviously, it’s a great story and it’s something that people in China are aware of, but from a business point of view there’s a lot more going on that we should be showcasing. Funnily enough, I was talking to the chairman of the China Chamber of Commerce who was in Manchester recently with a group of senior bankers and investors from London. They've been following the Chinese Government’s Covid guidelines, so they haven't travelled anywhere in the UK for months and I think they were incredibly surprised by the vibrancy of the city. And bear in mind, they only live in London. So, clearly, there’s still work to be done. We need to get more of those positive messages across, particularly where they can help with things like the levelling up agenda.
The economist, Jim O'Neill, who famously coined the ‘BRIC’ acronym, recently said that for the first time in 30 years he is less sure about the trajectory of the Chinese economy. Is he right to be concerned? I don’t think that's surprising given the way the Chinese economy is evolving and its movement towards a service economy. I'm not sure what the stats are but manufacturing costs in China have certainly been going up for a while. Plus, China’s Belt and Road Initiative is all about tapping new markets and finding new manufacturing centres. So, I think the move to a service economy will require them to look at manufacturing elsewhere; Southeast Asia, the Middle East and Africa. But I agree with Jim, particularly with the impact that Covid is having, but now also with the conflict in Ukraine because all of these will impact the world economy and they will impact China.
How can the UK be an R&D partner with China, especially developing green technology? I've always been a champion of R&D in the UK but we need to get the message right. A company like Huawei has something like 40,000 PhD students across China doing R&D at a scale we cannot even conceive of. For companies like this the fundamentals will always be done in China. However, I absolutely do see a massive partnership opportunity for the UK and for Manchester in forming collaborations to take on contracted research. We can say, “Tell us what your issues are, and let us solve them.” Like it or not, there’s no avoiding the fact that companies such as Huawei continue to be an important source of funding for research at many UK universities, and at Manchester more than most.
When the Forum started, I was very keen that we should move away from the football story. Obviously, it’s a great story and it’s something that people in China are aware of, but from a business point of view there’s a lot more going on that we should be showcasing.
Generally speaking, the UK has a very poor understanding of China beyond the headlines. You need people who are prepared to make a career choice to really focus on China, and we need to do better to encourage that.
