China - a market ignored is a market lost

When the Minister for Marine and Natural Resources, Mr Woods, leads a trade delegation to China next month he will end a long period of diplomatic inactivity between the two countries. This arid spell has been as puzzling to the Chinese as it has been indicative of lethargy towards China on the part of successive Irish governments.

The Chinese economy is expanding rapidly, with soaring demands for consumer goods, services and infrastructure, yet there has been no ministerial visit from Ireland (if one excludes the Women's Conference in 1995) since 1993-94, when there were two missions led by Mr Charlie McCreevy.

One of these was directed at the aviation industry and resulted in engine maintenance contracts for three Irish-based firms: Airmotive, PWAI and SIFCO Turbine Components.

Because of the continuing dominant role of the state in the Chinese economy, a trade delegation led by a Minister opens doors otherwise closed to foreign business representatives. This is not lost on Ireland's European partners. Finland for example has three to four ministerial visits a year. The Netherlands sends on average four ministers a year as well as trade delegations led by provincial governors. Denmark, since 1993, has had 14 official missions to China and several unofficial ministerial visits.

When China sought to punish European countries this year for endorsing a UN motion critical of China on human rights, it found that Ireland had no pending ministerial visits it could cancel.

In other ways Ireland is underrepresented in China. The Irish embassy in Beijing has only three diplomats (less than smaller economies like Croatia and Lesotho). It has the smallest representation of all EU countries except Luxembourg.

Denmark for example has six diplomats, Finland 10, Belgium 11 and the Netherlands 12. New Zealand has an economy smaller than Ireland but has 10 diplomats in Beijing; it belongs to the AsiaPacific region, but Dublin is actually as close to Beijing as is Wellington. (China's emergence as a world economic power coincides with the development of a global, high-tech, market environment in which every country is a neighbour.)

Each of these missions has at least two commercial attaches. Ireland has none. There is an Irish Trade Board employee in Beijing. He is an administrative assistant supplied by the Chinese Diplomatic Services Bureau. Like other Trade Board representatives around the world, he may help anyone except delegates from the food export business, because of a turf war at home.

The over-worked Irish diplomats have to fill in. Indeed, when the fisheries delegation led by Mr Woods comes to China next month, it could technically be denied the services of the Trade Board representative for the same reason.

In other ways the Irish mission to China is disadvantaged. Ireland's emissaries are not given time for language training, whereas serious countries give their diplomats two years to learn Chinese before taking up their duties in Beijing. "We find that this pays off in terms of effectiveness of staff, the level of access they can acquire, and the knowledge and contacts they build up," said the Australian embassy's economic counsellor, Mr Kyle Wilson, who took the two-year course and now speaks Chinese well. "Working through Chinese interpreters is a skill in itself ."

The "one man and a dog" Irish embassy is largely Beijing-bound because of its size. On top of that, the Irish ambassador to China, Mr Joe Hayes, is also ambassador to the Philippines. But it is important for economic counsellors and commercial attaches to travel extensively, seeking out and analysing opportunities and making personal contacts over endless banquets and toasts a vital step in penetrating the China market.

"It's critical to have a person from your own country on the ground who has extensive knowledge both of China and of the scene back home and who can understand your needs - and your accent," said a European diplomat.

Experienced diplomats stress that in China there has to be in place the means for a productive partnership between private sector business people and their diplomatic representatives, because of the role of the authorities in determining access to market and rules of trade and choice of joint venture partners. State agencies in China are also more comfortable dealing with companies which have the support of their government. This extends to what one diplomat called "the big white car with the flag syndrome, indicating to the Chinese government our judgment that particular companies are reputable".

Commercial officials not only give on-the-ground assistance to potential investors or companies seeking a niche market. They must spend much time lobbying the Chinese government to create an environment favourable to their investors and traders and to advance projects in specific sectors.

"Everybody who is anybody is trying to get a foothold in China," said Mr Wilson. "Opportunities are not limited to large companies. Small businesses can succeed in the China market. They can take advantage of power devolved to provinces and municipalities to approve investment projects up to $30 million (£20 million). They can also circumvent some of the problems of distribution and internal trade barriers segmenting the Chinese market by capturing niche markets."

The patchy Irish response to the challenge of rising China, which in 20 years will be the second largest economy in the world, results from several factors. One is clearly lack of political will at ministerial level. Another is a scarcity of resources. In the Irish foreign service there has been a tradition of "make do with less" as a Foreign Affairs official in Dublin put it, adding "It's the old Irish thing of do your best".

A further reason is the euro-centricity of some officials in Ireland who express scepticism about pushing trade with China, an attitude which may prove costly as time goes by. More importantly, in Dublin the level of attention paid to a foreign country is dictated by the volume of commerce, not the potential. "Generally the flag follows the trade," said a Trade Board official.

Trade with China is growing. Irish exports to China (excluding Hong Kong) increased by 34 per cent to £31.7 million in 1996, principally in electrical machinery, chemicals and telecommunications equipment. But it still ranks only 42nd in total Irish export trade. For comparison the level of exports from the Netherlands to China for 1996 was £400 million last year and from Finland £342 million.

This higher level of trade underlines their need for a high level of representation on the ground, but it also indicates the benefits of pioneering the field in China for potential Irish trade, business and investment.

The Trade Board has belatedly stepped up its effort to bring China to the Irish business community. For the last few years it has had only one staff official, Mr Gabriel McCarrick, based in Hong Kong and responsible for all of China. It is now about to open its first-ever Shanghai office, having contracted a resident Irish national, Mr Frank Mulligan to run it.

Mr McCarrick is leaving and is being replaced by a non-staff recruit, Mr Ng Yiu Wing, a Hong Kong national currently working for a Japanese company, who will become manager for Hong Kong and South East China.

The Trade Board now has a policy of recruiting local people on a fixed-contract basis, said Mr Paddy Delaney, director Asia, who is based in Singapore. "They learn a lot and we use the knowledge as long as it is relevant."

After three to five years the person hired can move on to another job and the Trade Board does not have people crowding back into head office. They had been doing this for six years in Europe, he said, and "our experience has been that Irish companies are now well capable of dealing with nonIrish people".

In an interview with The Irish Times last month, the Minister for Finance, Mr McCreevy, promised that requests for more resources for China would be considered sympathetically. What is also clearly needed, however, is a comprehensive review of policy on the level of representation in China appropriate to the EU country with the highest growth rate as it moves into the first division in terms of overseas trade, investment and business.