China Plan Inquiry
Under item 2, we will take evidence from Iain Smith, the convener of the Economy, Energy and Tourism Committee. As members know, as part of his committee's forthcoming inquiry into international trade, Iain recently visited China as part of a trade mission that was organised by Scottish Development International. We thought that Iain's observations about the trade mission and engagement between Scotland and China might be helpful to our China plan inquiry.
I invite Iain Smith to make a few introductory remarks.
Unaccustomed as I am to being on this side of the table, I will make some brief remarks. Before I do so, I declare an interest, in that, the week before I went to China, I visited Taiwan with a cross-party delegation. That trip was paid for by the Taiwanese Government. I will make some reference to the Taiwan visit at the end of my remarks.
I will briefly outline the nature and purpose of my visit, and share with you some observations based on the information that I gleaned from it.
As you said, convener, my committee intends to conduct an inquiry early next year into the internationalisation of the Scottish economy—that is, imports and exports. As part of that inquiry, SDI invited me to go on one of its trade missions. That trade mission was a particularly interesting one from my point of view, as it focused on wind energy in China and my committee has an interest in energy.
I received excellent support from Ian Ross and Paul O'Brien of SDI. I want to put on record my thanks for their assistance throughout the week.
A number of Scottish companies went on the mission, which was run in association with UK Trade and Investment. Among the Scottish organisations were the Aberdeen Renewable Energy Group; the all-energy conference, which is an annual conference that is based in Aberdeen; the Met Office, whose marine centre of excellence is based in Aberdeen; MLS Intelligent Control Dynamics, which has offices in Glasgow; SeaEnergy Renewables; and SgurrEnergy, which is already quite heavily involved in wind businesses in China.
The trade mission started off in Nanjing, where a dinner was held in—of all things—an Irish pub, which is owned and operated by a global Scot. That was an opportunity for the delegates to get to know one another and to meet Scots who work in the Nanjing area, who were invited along to give their impressions of what it means to work in China.
The following day, there was a seminar that was jointly organised by SDI and UKTI that enabled the British companies to make presentations to representatives from Chinese companies and to have individual meetings with them over lunch time.
The mission then moved to Shanghai, where we visited the Shanghai Electric wind turbine factory and the companies had an opportunity to present their wares to Shanghai Electric, which builds turbines and undertakes various other energy projects.
We then moved on to Beijing so that we could attend the wind energy exhibition conference, which was the main purpose of the mission. UKTI and SDI had a joint stand, at which a number of the Scottish and UK companies took space. It acted as a base from which members of the mission could tour the exhibition and meet people from other companies. I know that a number of links and contacts were made with Chinese energy companies.
We managed to attract quite a bit of attention by having a whisky reception, which was assisted by Iain Todd, from the Aberdeen Renewable Energy Group, who brought along his bagpipes. That gathered a crowd quickly and the whisky kept them in there, so Scotland's unique contribution continued.
On the second evening of the exhibition, the British ambassador held a reception at his residence, which was attended by representatives of a number of Chinese companies. It is important to point out that a large number of the companies that were invited were asked to attend as a result of SDI's knowledge of the companies that are involved. Most of the companies were SDI contacts rather than UKTI contacts. SDI clearly has a lead in the promotion of wind energy and renewable technologies, simply because of the depth of knowledge that it has in energy.
On Friday, I did not go to the final session of the exhibition. Instead, I had meetings with some of the other organisations that are involved in the area. I met Lucy Watkins, who is the first secretary for Scottish affairs in the British embassy in Beijing; Marie MacRae, who is SDI's head of office there; the China-Britain Business Council, which is headed by another global Scot; the British Council; and VisitBritain, which provides services for VisitScotland in China. Some useful information came out of those meetings.
Lucy Watkins was clear that being based in the British embassy was a distinct advantage, as she was able to pick up on more information that was of benefit to Scotland—information about inward-trade missions, for example—than she would if she were in a separate office.
Marie MacRae gave a detailed briefing about the work that is being done by SDI in China, which includes helping to organise trade missions from China to Scotland—there have been about nine on energy alone in the past year—and helping Scottish companies with visits to China.
I had a very interesting discussion with CBBC about some of the difficulties of setting up in China, the bureaucratic rules that businesses have to deal with and how the organisation can assist Scottish companies that wish to establish a base in the country.
My discussions with the British Council related largely to education and how we might improve links with Chinese universities, schools and colleges. Given that a number of universities and colleges have already established such links, we were particularly interested in how we might expand our school links with the country.
As for my discussions with VisitBritain, I was surprised to find that, despite the size of the growing Chinese market, the organisation has only four staff—two in Shanghai and two in Beijing—to market Britain to the whole country. Perhaps we should examine with VisitBritain and indeed VisitScotland whether we should be doing more to promote Scotland in China.
I also want to say a few words about my visit to Taiwan, because a number of useful issues arose that might be of interest to the committee. The Taiwanese Government is particularly interested in developing more links in areas such as renewable energy, life sciences and the creative industries. Again, of course, there are opportunities for our universities not only to improve recruitment links with the country but to develop joint research projects with Taiwanese institutions, and I hope to pass that message on to the various universities through Universities Scotland.
I also met Reggie Wu, SDI's Taiwanese representative, who made the interesting point that because of the bureaucratic difficulties of setting up in China there might be advantages in Scottish companies setting up in Taiwan and using it as a base for entering the mainland Chinese market. Links between mainland China and Taiwan are opening up all the time—indeed, I was able to take advantage of new direct air links to fly from Taipei to Nanjing—and opportunities certainly exist. I also met the British Council to discuss not only university links with Taiwan but the need for school links between Taiwan and Scotland.
I hope that those comments are of some interest to the committee. I am happy to take members' questions.
Thank you very much for that comprehensive report. It sounds like you had a hectic and detailed trip.
I realise that you visited China for only a short time but I wonder whether you could give us your observations on a couple of things in the China plan that we highlighted in our inquiry as possible weaknesses. First, could we be doing more to encourage Scotland's visibility in China? Secondly, do you feel that there is sufficient partnership working between SDI and UKTI, CBBC and other organisations to ensure better support for businesses?
On your first question, we need to bear in mind that China is a huge country. For example, 45 of its cities, including the three I visited—Nanjing, Shanghai and Beijing—have a population greater than that of Scotland. Given that kind of scale, Scotland is going to make relatively little impact.
Instead of trying to have a presence throughout China, which is simply not feasible, we should concentrate not only on where we should invest our resources but on the sectors with which we want to get involved. After all, Scotland has particular strengths and advantages in offshore wind energy; life sciences, with our world-leading institutions and research facilities; and computer gaming.
When I was discussing with VisitBritain how it marketed Scotland, I was told that the Chinese identify Scotland with golf. It did not matter whether it tried to promote golf in Wales or anywhere else; when the Chinese people think about golf they think about Scotland. Of course, whisky is another clear identifier. However, although there are a number of very clear Scotland brands in the Chinese market, I still think that the key thing is to concentrate on particular sectors.
SDI works closely with agencies such as UKTI; perhaps better in some areas than in others. It is a case of horses for courses. When SDI has knowledge about a subject, such as energy, the best way is for it to play a lead role; UKTI might have more expertise on other matters, so we need to work closely with it on them.
It is important that those who are on the ground in China decide how best to assist Scottish companies, whether that is through UKTI resources or our own resources. What matters is added value—what SDI can add to what is done for UK businesses to provide a little bit extra for Scotland.
Your comment that Lucy Watkins feels that it is important for her to be located in the UK embassy emphasises points that have been made to the committee about the importance of the partnership between Scotland and the UK in a country that is as large as China.
The message is clear, and we need to bear it in mind for Scottish Government representation in countries such as America, where being part of the British embassy provides access to resources that might not otherwise be available and to information that might be missed if we were not sitting in an office with the other people who are involved.
It might be worth asking the Scottish Government to consider seconding Scottish Government civil servants to the Foreign Office to spend time in embassies in countries with which we are particularly interested in developing links. That would give staff experience and knowledge of those countries. Lucy Watkins was seconded to be our first secretary for Scottish affairs and her term is coming to an end. Perhaps we could use secondments more to broaden our knowledge and influence in embassies throughout the world.
We have a videoconference coming up, so I must stick to the timetable.
I thank you for your comprehensive introduction and for your answers to questions, Mr Smith. You said that SDI organised the trip for you. You will have read our report, in which we were pretty scathing about SDI's contacts in some areas—that view comes not just from us but from people to whom we have spoken—but you speak highly of SDI and say that you had excellent support from it.
You mentioned wind energy. Did you speak about tourism when you were in China? That represents a huge market for Scotland. Is the lack of direct flights from Scotland to China a disadvantage? How much input does SDI have not just on energy but on other parts of your committee's remit?
SDI's role is to support any businesses that are interested in working in China, which includes those in the financial sector. I am aware that the committee's report criticised SDI's work to support the financial sector. I did not obtain clear information on that, because that was not the focus of my visit.
SDI provides support. When it does not have the expert knowledge, it should obtain that from the UK agencies with which it works. What matters is adding value; SDI does not necessarily have to be an expert on all sectors. It is clear that SDI is the primary expert on energy for the UK, as UKTI uses SDI's expertise on energy to assist its work, but the situation is the other way round in other sectors—SDI uses UKTI's expertise. The position varies.
A tourism issue that perhaps needs to be examined involves VisitBritain. VisitScotland does not have a presence in China; VisitBritain provides Scottish support and runs Scottish campaigns. For example, when the First Minister visited China in April, a campaign was run to promote Scotland and golf-related tourism. VisitBritain might need to consider its strategy, because having only four members of staff to cover China is insufficient.
It is fair to put our comments about SDI into context. The evidence was from one individual from Standard Life, and we have subsequently received a letter from Standard Life that—let us say—changes the tone of the comments. The criticism did not come directly from the committee; it reflected comments that were made to us. I certainly do not have enough detailed knowledge of SDI's work in China to offer criticism.
Did you get an opportunity to explore with the other businesses that were on the trade mission their impressions of SDI? I suspect that some of them have been on other trade missions at other times. I am just interested to hear what you picked up from those other businesses about how effective they find SDI.
In general, I received positive comments from the businesses that were on the trade mission. One company in particular was extremely positive and was keen to give evidence to my committee, when we have our inquiry, about the support it has received. After the company had been on last year's trade mission, SDI was able to give it contacts that it could build on, and just last week it signed a major contract with Taiwan as a result. The Met Office representatives who were there were grateful to SDI because of the links and knowledge that it has and the companies that it put the Met Office in touch with while it was there. When SDI has such knowledge, companies benefit from it, and generally speaking the responses were positive.
That might be a self-selecting group, of course, because those who go on the trade missions are those for whom SDI is able to provide something, so I might not have given a balanced reflection. However, the ones that I spoke to were very positive.
That is helpful; thank you.
Following on from a point that Michael Matheson made, I wonder if we are punching our weight in China—although perhaps I should say, "Punching the weight that we are allowed to by the amount of money we are spending." How many people does the SDI have and where are they located? How does that compare with Ireland? The paper I have in front of me compares Scotland with Ireland and the USA, which I find quite bizarre.
I cannot tell you the exact numbers. SDI has offices in Shanghai and Beijing in mainland China, and in Hong Kong, but I am not sure about the exact number of staff. I think that there are three in Beijing, and there might be two or three in Shanghai.
From your experience, what is your evaluation of the value that we get from that number of people?
I think that we get very good value from the work done by a relatively small staff. As I say, China is a very large country so there is a limit to what can be done. However, if the effort is focused on the areas in which we have particular strength, such as renewable energy and finance, it can add value over and above what we would get otherwise. Obviously, if we put more resources in, we might get more out, but we get good value for money from the resources that we have there.
You have just touched on the point I was going to raise. Do you think that the SDI is fully using the resources it has and needs more to do more work? You were talking earlier about doing more, but I wonder if that is physically possible with the resources that Scotland has at its disposal at the moment.
I would be pre-empting my committee's inquiry on the issue if I were to answer that question just now. It is certainly one of the issues that our committee will be considering when we look at the internationalisation of Scotland's economy and ask whether the resources that we are putting into organisations such as SDI are sufficient to meet their needs.
My final question is about visibility. Again, we are comparing ourselves with Ireland and the United States. Did you find anything that was uniquely visible that sticks in your mind? Is there anything that we should be homing in and building on?
It is a bit difficult to answer that on the basis of what I was able to see when I was there. I spent quite a lot of time travelling in taxis between the hotel and the exhibition centre so I did not really get out and about to see what is on the ground. However, the evidence suggests that golf and whisky are clearly identified as Scottish, and we can certainly build on them. That is not necessarily the tartan and shortbread approach, but certain things are clearly identified as being Scottish and we can build on them.
I realise that Iain Smith's trip was focused on a particular industry, but were you able to gain any overall impression? One or two individuals suggested to us that to do business with China you have to build up the relationship. You cannot just go in and do business there and then; the relationship has to be built up over time. For that reason, and because of the scale of the country, they suggested that our focus should be on one or two specific geographical areas so that we can get the biggest bang for our buck, as it were. Were you able to gain any ideas about that from your own experience or through conversations with SDI or businesses?
That is probably a very fair assessment. China is so large and we are a very small country, so it would be madness to try to spread ourselves across the whole of China. We have to concentrate on geographical areas and sectors where we have particular strengths. If we can find a geographical area that links in with some of our strengths or that is developing in sectors in which we have particular things to support, such as offshore energy or life sciences, we should focus our efforts on it rather than try to be all things to all men.
It has always struck me that it requires a fairly sophisticated approach and strategy to do exactly what you describe, which is to look at the sectoral interest and the geography. Do you feel that SDI recognises that fully and is taking such an approach? I am thinking not only of SDI—it is a shame to single it out—but of all those who, on our behalf, do business daily with China.
Scottish Enterprise's overall strategy, which is to concentrate on key sectors, feeds through into what SDI does. The information that I received from the energy sector is that it is very focused and is looking at companies that have the potential to provide both inward investment into Scotland in developing our offshore wind market and opportunities for us to sell services and expertise to China. That approach is reflected in not only outward visits from Scotland to China but inward visits from China to Scotland, when SDI has a knowledge base of the companies that might be of interest and can show Chinese businesses what Scotland has to offer. That approach seems to be paying some dividends; a number of companies such as Clyde Blowers and SgurrEnergy seem to have benefited from it.
I have one final question. Some of the evidence that we received suggested that doing business in China is enhanced when it is underpinned by parliamentary or political support and that there is therefore a strong argument for parliamentarians to be involved in trade missions, as you were. Did you get a feel for that during the visit?
Yes. It seems to be worth emphasising the point that parliamentary and ministerial support for trade missions is important. The point that Patricia Ferguson made about building up a long-term relationship is also important. You cannot just go in and do business on one trip; you have to go and build up trust to enable the relationship to develop. Parliamentary and ministerial support for those efforts is probably very important.
Unfortunately, we have run out of time. Because of our videoconference link we must stick to our timetable this morning, but I thank Iain Smith for coming along and sharing his experiences. We look forward to his own committee's inquiry report; I am sure that we will read it with some interest.
I will suspend proceedings for a couple of minutes while we undertake the technical work that is required to videoconference with Brussels.
Meeting suspended.
On resuming—