Head of China-Britain business agency says smaller UK firms find going tough in China

Stephen Phillips says helping UK micro businesses gain access to China market is one of his challenges. Nick J B Moore / for China Daily

Cultural differences can play a major role when negotiating with the Chinese, the chief executive of the China-Britain Business Council (CBBC) believes.

Stephen Phillips says contracts signed with Chinese companies often conform to different norms than in the West.

"When a UK company signs a contract it assumes that this is going to be the rules of the game for the next five years or a decade. From the Chinese point of view it might be merely a starting point."

Phillips was speaking in his organization's suite of offices in Portland House on Bressenden Place near London's Victoria.

As head of Britain's leading body to promote trade and investment between the UK and China, the 47-year-old is often on a visit to the world's second-largest economy.

"I am probably there every six weeks or so. Throughout the autumn we will be taking companies to a number of cities. We have got a very extensive program," he says.

Phillips, who has spent a large part of his career in Asia, says he finds China's fast pace of development invigorating.

"I think what appeals is the energy of a country that is undergoing such rapid transformation. It's just the dynamism from a business point of view as well as the history, the culture and the people," he says.

Britain is China's second largest European trading partner after Germany. Some 1.4 billion pounds (1.63 billion euros, $2.16 billion) of trade deals were announced between the two countries after Chinese Premier Wen Jiabao's visit to the UK in June.

In November last year, British Prime Minister David Cameron said on the UK's biggest trade mission to China that he wanted to double UK trade with China to 62 billion pounds by 2015.

Phillips will play a pivotal role facilitating all this. His organization hosted a dinner for Chinese Vice-Premier Li Keqiang in London in January and staged no fewer than 400 events last year in both the UK and China.

"On the simplest level, our role is to have more UK companies doing business in China, whether that is investing, exporting or working with Chinese companies," he says.

He says it is important to combat the perception that Britain does not make anything anymore and that what the Chinese want is German engineering excellence personified by companies like Siemens.

"It is a sort of tabloid view. Germany has done very well in providing overall (engineering and technical) solutions whereas a lot of UK manufacturing and industrial expertise tends to be at the higher, more specialized, end that might just be one part of an overall solution," he says.

"The British company might be making the sexy bit that actually makes the German equipment work but it doesn't provide the overall solution."

Phillips argues that as a result, the UK's trade is often under-reported in the official statistics.

"The export of Airbuses to China often gets reflected in France's statistics and yet somewhere between 40 and 60 percent of its value, the wings, the avionics and very often the engines, are manufactured in the UK," he says.

The CBBC dates back to the early 1950s when British companies were among the first from the West to trade with the new People's Republic of China.

One of its forebears was the 48 Group Club, which still exists as a business network body, which held a series of "Icebreaker Missions" in China.

The modern organization is independent but works closely with UK Trade and Investment, the government's trade promotion body.

It has some 900 members, of which 15 are Chinese companies. It is also not just represented in the major locations in China such as Beijing and Shanghai but has 11 offices throughout the country.

One service it offers UK businesses is branded Launchpad and enables companies to hire a Chinese project manager at any one of the CBBC's China offices to work on their behalf and look after their interests. Such a service costs from 25,000 pounds a year.

"The prices varies depending on the nature of the experience of the individual but it is a sort of low risk entry strategy. It is actually quite cost effective," Phillips says.

"By having someone on the ground you can probably get away with making just two or three visits to China a year instead of seven or eight," he says.

Phillips, who was born in Worcester, studied chemistry and law at Exeter University before going into banking, where he gained early international experience with Barclays International in Botswana.

He then spent 10 years in Hong Kong with Barclays working on transportation and oil and gas projects.

After a spell with Deutsche Bank in Singapore, he helped launch iBridge Capital, which was both a financial boutique and provided software solutions and was involved in China projects.

Phillips, who has a home in the Philippines, returned to the UK to work for UK Trade and Investment in the southwest of England before being recruited by the CBBC.

"I was approached about whether I would be interested in the role here and inevitably I was. My passion is Asia," he says.

Phillips says one of the challenges is to help UK micro businesses gain access to the China market.

"Chinese companies tend to want to deal with the big boys, whereas some of the most innovative and leading edge technology comes from the very smallest businesses," he says.

"Often they have the right fit with what China wants but it can be a challenge to open doors for them."

Phillips says many businesses, large or small, recognize the business opportunities that exist in China, particularly now that third- and fourth-tier cities are beginning to develop.

"Many businesses are now faced with the situation that their home market as well as European and North American markets are in the doldrums and that China represents a real growth opportunity. We find continued growth in interest among UK companies," he says.

Phillips says it also remains a headache for UK and other Western businesses to recruit quality staff in China, particularly at senior and management level.

"Being able to hire the right talent is the major issue that companies report to us. It is often more problematic than what people perceive to be the major issues such as intellectual property protection and local regulations," he says

Some companies complain of the laborious process of doing business in China, often involving endless banquets and ganbei toasts, where you are obliged to drain your glass each time at the risk of inebriation.

"One has to understand there is a very different way of doing business. Wining and dining is an important part of relationship building. I think most people accept and get used to it. Those that don't, frankly, won't succeed in China," he says.

"You have to be passionate about it and enjoy it."