Why should the UK’s tech sector care about China?

The prominence of China in the global economy has changed markedly over the last few decades. From an agricultural society three decades ago, today China has become one of the largest economies and a major trading nation, and it is destined to become even more influential in the years to come.

As the world’s largest exporter and the single greatest destination for global direct investment, it is a huge and expanding market for UK businesses. With the rapidly changing shape of the Chinese economy, there is also a growing appetite for international links, especially in the technology sector.

The growing trade relationship between the UK and China is best illustrated by the fact that China has grown from being the UK’s 26th and 15th largest export and import market in 1999 to claiming the 6th and 4th places, respectively.

Numerous challenges for trading with and operating in China are well-documented and make it a tough market to crack. However, British businesses are increasingly finding their way into the Chinese market. Prominent British companies, such as Jaguar Land Rover, Abcam, AstraZeneca and Horizon Discovery are well known for their business with China. However, many other companies like Novacyt, CyanConnode, Congenica, Porvair, Sepura, Meteor Inkjet, TWI, Treatt plc and others have blazed a trail in China too, and BT has recently become the first global telco to receive domestic telecoms licenses in China.

On the other hand, the UK is now the biggest recipient of Chinese investments in Europe. Chinese firms have increasingly invested in the UK in services, advanced manufacturing, technology and other high value-added and consumption-related sectors, as well as in assets providing high and stable returns.

With the UK reviewing its global trade and investment links, there is a strong case to be made for enabling British businesses to collaborate and access opportunities in China. Below we provide a brief snapshot of why China’s tech ecosystem is becoming increasingly important for UK’s tech: 

  • Supermarket of the world: China has a total population of 1.5 billion, of which approximately 300 million is urbanized – a number that is expected to increase to 600 million in the next 15 years. It boasts over 100 million middle-class consumers (forecast to reach 400-500 million in the next 10 years) and around 160 cities with population of more than 1 million. It is undoubtedly the “supermarket of the world” with demand for more sophisticated products expected to rise in the future.
  • World’s largest ICT market: China is also one of the world’s largest ICT markets. The country accounts for 50% of global digital payments and three quarters of global online lending market. It also has the largest population of internet users (731 million) on the globe. Half of all AI investments in 2017 occurred in China and the government spent around USD 200 billion on AI.
  • High-spender on tech: Tech spending in China reached around $234 billion and it is expected to rise to $844 billion by 2020.
  • Developed infrastructure for tech trials: As part of its focus on improving technology infrastructure, China has been one of the leading nations in implementing 5G technologies. 5G equipment has been rolled out in trials in 100 cities across the country. 
  • Vibrant & active tech community: China is emerging as an active global player in fostering technology start-ups and encouraging the growth of tech businesses through strong support ecosystem. In 2017 alone, 4,000 tech, media and telecom start-ups have been created in China (10% of which were pegged for high growth). China is also the home to 9 out of top 20 tech giants and has produced 34 ‘unicorns’ in the past 3 years. In addition, it supports the growth of tech businesses through over 2,500 tech incubators and accelerators around the country. 
  • Large-scale financing: Large-scale financing is also supporting the growth of tech in China. Through around 15,000 investment institutions China has held nearly 10,300 investment and financing events in 2017 and the private equity reached $120 billion in the same year.
  • World’s new science and technology R&D powerhouse: Chinese R&D investment has grown remarkably over the past two decades. It is now the second-largest performer in terms of R&D spending and accounts for 20% of total world R&D expenditure. The rate of R&D investment is greatly exceeding that of the US and the EU. The Government has also committed around $41 billion between 2016-2021 for scientific tech investment.
  • Skilled workforce: The steep improvement in science and technology performance has been underpinned by significant strides in science and engineering education. China is now the world’s number one producer of undergraduates with science and engineering degrees, delivering almost one quarter of first university degrees in science and engineering globally. Since 2007, the country has awarded more PhD degrees in natural sciences and engineering than any other country globally.

China’s global role in technology sector is growing from strength to strength - from passenger drones, high speed trains, artificial intelligence, internet through lights, quantum satellite to Scarlett Johansson robot – China is involved in all. The benefits from a global science and technology world with China as an extra strong pole will accrue to many, but some will benefit more than others. With the country’s increasing focus on high-tech - areas where the UK has complementary and advantageous strengths – there is a real opportunity for British tech businesses to advance collaboration and access new commercial opportunities across the UK-China tech corridor. Thus, developing an enabling environment that encourages closer collaboration between the two tech ecosystems can offer tangible, long term benefits to the UK’s economy.

At techUK, we are delighted to have launched the UK-China Tech Forum, which aims to advance these objectives further. Jointly hosted by techUK and the China-Britain Business Council (CBBC), the UK-China Tech Forum has been set up to bring together representatives of businesses, government and other stakeholders interested in influencing or understanding the policy landscape that impacts the technology sector, trade relations, and the market opportunities and challenges and market growth in both countries.

As a continuous activity, the forum brings members together on a regular basis to discuss issues and events that may impact their growth in the UK and China and provides an avenue for collective concerns to be aired and discussed with the government as well as for participants to explore emerging opportunities for growth and expanding their business networks. If you are interested to learn more or join the UK-China Tech Forum activities, please be in touch with international@techuk.org.

 

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